Casino operator Wynn Resorts and equipment providers Everi Holdings and AGS had something in common Thursday.
The companies were the only members of the gaming sector not to experience a stock price decline during the day’s nearly 1,200-point plunge in the Dow, which has added to what the investment community views as one of the worst weeks for the markets since the 2008 financial crisis.
Market experts said the three major U.S. stock indexes entered correction territory on Thursday, a 10% reversal from recent highs.
Fear over a growing number of cases in the U.S. of the coronavirus hasn’t spared any sector, including the gaming industry.
The virus, which originated in Wuhan, China, decimated Macau’s gaming market just before the lucrative Chinese New Year’s holiday at the end of January. Casinos, which were closed for two weeks this month, have reopened. However, some analysts speculate gaming revenues will be down by up to 100% when the figures for February are released this weekend.
“While there has been no evidence of coronavirus impacting the gaming business in the U.S. yet, the threat and fear are growing,” Union Gaming Group analyst John DeCree said in a note to investors Thursday. “The outlook could shift rather quickly as it did in China and Macau.”
Deutsche Bank gaming analyst Carlo Santarelli, in a note to investors following Eldorado Resorts’ fourth quarter earnings release Wednesday, offered up a few reasons why regional gaming stocks were taking a beating along with the rest of the market, such as shares often being traded more often by investors.
“Fundamentals in regional gaming have taken a backseat to negative momentum, and, more importantly, fear,” Santarelli said. “Despite regional gaming being the one segment of our coverage universe that is likely least impacted by (coronavirus), it has taken the brunt of the impact within the recent market sell off.
On Tuesday, Caesars Entertainment CEO Tony Rodio said the company was, “pleased and pleasantly surprised to say that we’ve seen no business impact whatsoever. As matter of fact, we’re off to a great start in 2020 from our (high end) business from Asia.”
Rodio said Caesars had several “metrics and dashboards” that are monitored on a daily basis to see if there are any hints to a downturn from the virus.
Eldorado CEO Tom Reeg, a day later, told analysts, “We’re seeing no current impacts from the virus scare and we feel very good about where we are and where we are headed.”
Reeg also tried to alleviate investment community concerns that stock price declines could disrupt Eldorado’s $17.3 billion buyout of Caesars, which is expected to close in the first half of the year. Eldorado shares closed at $49.88 on the Nasdaq Thursday, down $1.52 or 2.96% following a 7.59% dip on Wednesday.
“Eldorado management isn’t seeing any impact so far from coronavirus,” SunTrust Bank gaming analyst Barry Jonas told investors. “Ultimately, we think management’s commentary should ease any potential concerns ahead of the upcoming deal close.”
The Dow Jones industrial average decline – 1,190 points, the largest single-day drop in history – was 4.4 percent. The Dow is down more than 3,500 points in the last four days.
The Standard & Poor’s 500 and Nasdaq composite both fell at least 4.4 percent.
“The current and largest concern now is if consumers start pulling back on their spending. Consumer spending has been supporting the economy,” Howard Silverblatt of S&P Dow Jones Indices, told the Washington Post.
Several gaming stocks neared 52-week lows after four days of steady declines.
Share prices of Las Vegas Sands, Wynn Resorts, and MGM Resorts International – which all have casino holdings in Macau – have been under pressure since January when the coronavirus outbreak surfaced in China.
Las Vegas Sands closed at $58.43 on the New York Stock Exchange, Thursday, down 73 cents or 1.23%. MGM Resorts closed at 25.52 on the New York Stock Exchange, down $1.19, or -4.46%.
Wynn Resorts was up 41 cents or 0.37% on the Nasdaq to close at $111.16. Still, despite the slight increase, Wynn is more than 27% below its 52-week high of $153.41.
Everi Holdings was up 12 cents or 1.10% on the Nasdaq to close at $11 and AGS was up 18 cents or 1.94% on the Nasdaq to close at $9.45.
Those were the highlights Thursday.
Gaming industry stocks declined an average of 2.87% on Thursday. Century Casinos had the largest percentage dip, 7.74%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
