Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
U.S. casino foot traffic
In a March 7 note, Jefferies analyst Katz wrote that foot traffic at U.S. casinos in February was down by 1.1% year-over-year. “Additionally, compared with 2019, volume was 9.0% lower during the month, which is better than January’s 17.3% gap vs. 2019. We expect trends to stabilize through 2024, as comparisons have been challenging through 2Q23 and 3Q23. The Street also remains on guard for the impact of macro trends on earnings levels, including higher costs for insurance, utilities, and labor, that have challenged markets unevenly.
“In February, foot traffic in Ohio was down 2.9% year-over-year, while foot traffic in Pennsylvania was 2.6% higher than February 2023. In Atlantic City, February volumes were 18.0% lower than 2019 levels and 3.5% lower year-over-year. Illinois experienced an approximately 14% decline from 2019 and saw a year-over-year decrease of 3.3%. Our take is that the monthly performance reflects an impact from competition in specific locations in the current month, despite having an extra day relative to last year.”
Aristocrat/NeoGames
Aristocrat Leisure’s impending acquisition of NeoGames in an all-cash transaction drew interest from Wall Street analysts.
Truist Securities analyst Barry Jonas March 6 also discussed the NeoGames/Aristocrat deal, writing that NeoGames “reported Q4 EBITDA below us/Street (estimates). Management continues to operate ahead of the Aristocrat closing the acquisition, now expecting to receive regulatory approvals in April before closing in May. We remain Hold-rated with our Price Target at $29.50 (the takeout price) – while risk/reward was interesting at ~$25 in October (had fallen given tensions in Middle East & Ukraine), the stock has recovered to within a dollar of the expected takeout. We flow through the quarter but make no major changes to our forward EBITDA estimates.”
Writing on March 6, Jefferies analyst David Katz noted that the $29.50 per share cash acquisition “represents a premium of 104% to the three-month volume-weighted average price of their shares and approximately 15x our 2023 Enterprise Value/EBITDA. The transaction has been unanimously approved by the board of directors, with an expectation to close within 12 months, subject to customary closing conditions. We believe the deal brings Player Account Management capabilities and the ability to grow the other aspects of NeoGames’ business in ilottery, igaming content, and online sports betting solutions.”
Las Vegas Strip room rates
J. P. Morgan analyst Joseph Greff March 11 surveyed Las Vegas Strip room rates for the week of March 31, 2024 — April 6, 2024
“For the survey period, relative to the comparable period 2023, midweek rates are +10.0 % and weekend rates are +4.0 % (+8.0 % overall),” Greff wrote. “By company: MGM rates are +45.0% for the midweek and +25.0% for the weekend (+37.0 % overall); Caesars rates are -45.0% for the midweek and -29.0 % for the weekend (-39.0% overall); Wynn Resort rates are +24.0% for the midweek and -4.0% for the weekend (+12.0% overall); Venetian/Palazzo rates are +43.0% for the midweek and +9.0% for the weekend (+32% overall).”
