Outlook for Las Vegas Strip earnings reports: “Less bad than expected”

Thursday, January 23, 2025 9:11 PM
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  • United States
  • Macau
  • Nevada
  • Singapore
  • Buck Wargo, CDC Gaming

Bank of America Securities’ analyst Shaun Kelley released a note to investors, indicating that when fourth-quarter earnings reports for Las Vegas Strip casinos trickle out over the next 45 days, they “may end up less bad than expected.”

Nevada will release gaming revenue numbers for December on January 30.

Kelley expects Las Vegas Strip gaming revenue to be down in December year-over-year, given a difficult baccarat comparison. The third quarter was down 5% year-over-year.

The firm models Strip revenue per hotel room down 7% to 8% for the fourth quarter, with December up 10% year-over-year.

“Our fourth quarter estimates are 2% below the Street, and we are 3% below the Street for MGM (Resorts International) at $738 million,” Kelley said. “While the high-end has driven growth in Vegas for most of 2023-2024, we expect Caesars (Entertainment) to outperform in the fourth quarter, driven by easier Formula One comps and strong trends in our room rate survey. We expect an upbeat tone on the first quarter outside of lapping the Super Bowl and think concerns of peak Vegas may start to subside.”

Kelley said the estimates for casinos that serve Las Vegas locals are in line with the Street.

For regional casinos, consumer trends accelerated over the last three to four months and Kelley said B of A “tweaked” its estimates up slightly. Same-store gaming revenue was up 1% year-over-year in October and 6% in November. Limited December state reports show some sequential deceleration to 4% year-over-year.

“Overall fourth quarter trends are tracking up 1%, an acceleration from minus 1% year-over-year in the third quarter,” Kelley said. “Our regional EBITDA estimates are slightly above Street. We lower our Caesars price outlook to $40 from $47.50 and lower MGM’s price outlook to $37.50 from $42.”

Kelley also weighed in on Macau, saying its estimates are below consensus driven by the softness in recent market share data for Las Vegas Sands and on margins. Fourth-quarter EBITDA estimates are 3% below the Street on a weighted average basis. While weekly gaming revenue checks have remained healthy, sentiment on U.S.-listed Macau names has weakened, given weak market-share checks and negative revisions for 2025, Kelley said.

“We think investors will be focused on commentary on recent trends and expectations for Chinese New Year. In Singapore, our fourth-quarter Marina Bay Sands estimate is $492 million and largely in line with consensus.”

On the digital gaming front, Kelley thinks DraftKings is tracking to $40 million to $100 million in fourth-quarter EBITDA versus guidance of $170 million and a reiteration of 2025 guidance of $900 million to $1 billion.

“We think Caesars could report $40 million of digital EBITDA, and Penn (Entertainment’s) Interactive segment could report $120 million of fourth quarter EBITDA and below the low-end of guidance,” Kelley said.

Kelley highlighted multiple bills for igaming legislation in New York, Wyoming, Indiana, and Massachusetts.