Casinos are the least favored segment in gaming at present, according to Jefferies Equity Research analyst David Katz. He shared his findings in a July 2 investor note.
Las Vegas, along with Macau, faces “increasing headwinds,” per Katz. “We believe growth in the sector is scarce, though recent M&A suggests potential catalysts ahead.”
Katz continued to favor Station Casinos as his top pick, although second-quarter trends at MGM Resorts International pointed to solidity there, he said. However, Katz felt that both Penn Entertainment and Monarch Casinos & Resorts were at risk of a pullback in the stock market, despite recent strength in their share prices.
Easy comparisons were driving an apparent Vegas recovery, Katz contended, highlighting an April/May surge of 10 percent in gambling win, despite flat visitation. Also helping were conventions, “including incremental large rotational events such as State Farm’s National Agency convention.”
Katz said he expected upcoming earnings reports to reflect stable Las Vegas trends, with Caesars Entertainment a particular beneficiary of the State Farm conclave. MGM, by contrast, was better positioned to reap the rewards of improved baccarat play, where revenue shot up 15.2 percent in April and 58.5 percent in May.
The analyst wrote, “Our view remains that longer-term growth durability is less certain absent a more pronounced recovery in leisure demand, given the inherent cyclical nature of group travel and evidence that all-inclusive promotional offerings are stabilizing lower-end consumer spend. In short, we expect a positive 2Q amid longer-term uncertainty.”
Regionally, five percent revenue growth benefited Boyd Gaming and Caesars, up 4.9 percent and 4.5 percent, respectively. “As we move beyond the start of the year — when supply-side gaming legislation drove the narrative — we expect focus should shift back to growth durability and opportunities for accretive M&A.”
As for the regional durability, especially for Boyd and Caesars, Katz pointed to healthy spending among core customer bases. “In addition, recently announced transactions and healthy-to-improving balance sheets among key operators suggest capacity an appetite for capital-markets activity,” he noted.
Katz thought the upcoming acquisition of Caesars by Fertitta Entertainment would enhance market share, while Barry Diller’s offer to buy MGM would put a floor under that stock’s price. He opined that additional merger activity was likely, with Churchill Downs, Penn, Monarch, and Boyd all in play.
Macau was observed to be coming off a weak June, in which gambling receipts plunge 12.1 percent. That was the weakest month for the enclave since December 2022. Among a variety of one-time factors, Katz thought the current World Cup tourney was the key.
Predicting slower Macanese growth throughout the remainder of 2026, Katz said Wynn Resorts was “the preferred name in the group, given its operational strength in the premium segment.” He predicted 11.3 percent cash-flow growth for Wynn’s Macau operations.
By contrast, Las Vegas Sands “remains in transition, as it reorients toward premium mass customers, which should pressure margins over the medium term.” Katz forecast narrowing profit margins for Sands, as a result.
