Wall Street Bets: Analysts take on U.S. casino foot traffic, Inspired Entertainment & Macau

May 13, 2024 1:04 PM
Photo: CDC Gaming Reports
  • Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
May 13, 2024 1:04 PM
  • Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.

April foot traffic at U.S. casinos

In a May 13 note, Jefferies analyst David Katz wrote that the index level of national casino foot traffic at U.S. casinos in April was down 2.9% year-over-year:

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“We expect trends to stabilize through 2024, as comparisons have been challenging through 2Q23 and 3Q23,” Katz wrote. “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.”

Katz also noted that key markets were “choppy.”

“In April, foot traffic in Ohio and Pennsylvania was up 2% and 4%, respectively, year-over-year,” he wrote. “In Atlantic City, April volumes were 13% lower than 2019 levels and 4% lower year-over-year. Illinois experienced an approximately 9% decline from 2019 and saw a year-over-year decrease of 2%. Our take is that the monthly performance reflects the ongoing normalization of traffic trends post COVID, where volatility remains, as well as from competition in specific locations.”

Inspired Entertainment

Inspired Entertainment’s 1Q24 results drew interest from analysts.

Truist Securities analyst Barry Jonas, in a May 10 note, wrote that Inspired’s “Q1 EBITDA came in below our/Street estimates in a ‘Murphy’s Law’-type quarter for INSE. Management sees EBITDA recovering significantly in Q2 (+50% quarter/quarter growth), telegraphing a further recovery in 2H and into 2025. We continue to like INSE’s product suite and runway for growth, and see opportunities to further unlock value for shareholders through capital returns and/or M&A. We remain Buy-rated but conservatively lower 2024E/25E by -4%/2% while maintaining our $13 price target.”

David Bain of B Riley Securities also posted a statement on Inspired Entertainment May 12. “While an understandable initial earnings reaction, INSE call commentary suggests little material change to its CY24E EBITDA outlook,” Bain wrote. “Further, we believe investors may have overlooked other commentary suggesting INSE is considering strategic alternatives for its holiday park business. We view this as a significant potential positive–positioning a higher mix of digital EBITDA, increasing margins, reducing seasonality, reducing capex, and creating a more simplified, salable business.”

Macau

Jefferies’ Katz also looked at the “Post-Holiday Cooling Period” in Macau.

“Macau GGR slowed since the start of May, but we expect a neutral reaction given this is part of a traditionally slower post-holiday trend,” Katz wrote in a May 13 note. “Even at the bottom end of industry source estimates, May would be the second-highest monthly average daily rate this year. The IVS (individual visitation scheme) extension from another eight Chinese cities should improve connectivity further which focuses on pushing Greater Bay. Based on macro concerns, we remain highly selective on Macau-related stocks globally.”