Gaming stocks have taken a hit in the market selloff and over the past year, but to John DeCree, director of equity research at CBRE, some opportunities remain.
Over the past 12 months, the casinos-and-gaming subcomponent of the S&P 500 has underperformed the overall index and most of its other subcomponents by a 3-to-1 margin, according to CBRE analysis.
The casinos-and-gaming subcomponent of the S&P 500 is trading at 6.5x fiscal-year 2026 consensus EBITDA, making it the second cheapest component of the index next to energy, DeCree said in a note to investors.
“With economists forecasting an increased probability of recession and elevated market volatility, the casino and gaming group remains uniquely out of favor among investors,” DeCree said. “Although we expect market volatility to remain high and price action to be dictated more by headlines than fundamentals in the coming weeks, we do see some tactical opportunities to invest in the space.”
A decline in international visitation, meanwhile, could be the greatest near-term risk to fundamentals on the Las Vegas Strip, Decree said. While Las Vegas is less reliant on international visitation than in prior periods, accounting for just 12.1% of total visitation, Mexico and Canada collectively represent more than half of all international visitors to Las Vegas and are forecasted to have the steepest drop in travel to the U.S.
“We currently estimate a relatively minor impact to net revenue and EBITDA for Strip operators from a moderate decline in international visitation and remain optimistic that the largest operators could leverage their loyalty programs and player databases to backfill some lost room nights,” DeCree said.
DeCree also believes the Las Vegas locals market is better equipped to weather a recession today relative to the Great Recession in the late 2000s, given the city’s more diversified economy and a substantially improved supply-and-demand balance in the locals market. The gaming supply per resident in Las Vegas is significantly lower than in 2007, due to both supply contraction and population growth.
Overall, DeCree continues to view Boyd Gaming ($88 outlook) as “one of the more defensive names in our domestic gaming group” and recommends the stock as “a shelter from the storm.”
For long-term investors, CBRE sees an opportunity to buy Wynn Resorts ($120 outlook) at 7.6x forward EBITDA.
“Although there could be more downside in the near-term and the China risk remains high, the Wynn assets are iconic and the company has a substantial near-term growth catalyst on the horizon when Wynn Al Marjan Island opens in 2027.”
In a similar vein, DeCree said Red Rock Resorts ($55 outlook) is also trading at a notable discount to its historical level and offers investors “both best-in-class real estate and a long-term growth pipeline” through several development sites in Las Vegas.
“The company owns/operates best-in-class assets in the Las Vegas Locals market and controls several key development sites to capitalize on secular economic growth in Las Vegas,” DeCree said. “Moreover, we believe the locals’ market should be more resilient today than in prior recessions given the supply and demand rebalancing. Although there could be more downside ahead, buying Red Rock Resorts for its high-quality real estate at discounted valuation should pay off in the long-run.”
