Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Rush Street Interactive
In his weekly look at stocks and themes investors are inquiring about, Jefferies analyst David Katz July 21 wrote that “Rust Street Interactive stock reached 52-week closing high levels this week. In March, Bloomberg released a report suggesting that RSI was fielding offers to sell to larger operators, including DraftKings. RSI has not commented on this report. Our view has been that RSI has executed well, notably in igaming and in Latin American markets and has overall demonstrated reasons for success, without the scale of market leaders. We expect the management to consider efficient paths to value expansion as they present.”
Gaming industry fundamentals
In a July 18 note Truist Securities analyst Barry Jonas wrote that “Gaming continues to underperform year-to-date. … The bulk of our coverage remains in value territory as investors fear an ever-looming consumer pullback, though gaming fundamentals have largely held up (less downward estimate revisions for Q2 than in some time) despite persistent macro pressures. We adjust estimates and price targets with no ratings change.
“In-line with record Vegas heat, we like the setup for Strip operators (MGM & Caesars) in spite of ‘peak Vegas’ concerns; as well as potential rate cut beneficiaries (including Caesars, GLPI, VICI). We expect DraftKings could take down their 2024E guide on Illinois online sports betting increases, though how they respond matters more. All eyes remain on Penn ahead of coming ESPN Bet product enhancements and amidst M&A speculation. In gaming tech, Light & Wonder continues to execute while M&A has unfolded as we thought. IGT could benefit from potential Mega Millions price increases, but for now we see shares range bound minimally until the Everi deal closes.”
Las Vegas Strip room rates
J.P. Morgan analyst Joseph Greff looked at Las Vegas Strip room rates for the week of August 11-17, 2024.
“For the survey period, relative to the comparable period 2023, midweek rates are -6% and weekend rates are -8% (-7% overall),” Greff wrote. “By company: MGM rates are -14% for the midweek and +2% for the weekend (-9% overall); Caesars’ rates are +35% for the midweek and -18% for the weekend (+3% overall); Wynn Resorts rates are -42% for the midweek and -31% for the weekend (-39% overall); Venetian/Palazzo rates are +46% for the midweek and +9% for the weekend (+30% overall).”
Hard Rock Northern Indiana
In a July 19 statement, Fitch Ratings revised Hard Rock Northern Indiana’s Outlook to Positive from Stable, “while affirming its Long-Term Issuer Default Rating at ‘B’. Fitch has also upgraded the senior secured term loan B to ‘BB-‘/’RR2’, from ‘B+’/’RR3’.
“The Positive outlook reflects our expectation that HRNI will maintain its strong market position in the greater Chicagoland and Northern Indiana markets and steadily deleverage over the forecast horizon, while generating free cash flow in the mid-high single digits. The term loan’s upgrade reflects improved recovery from mandatory amortization payments under the facility.”
