As much as critics can point to potential leaks – an aging slot player, growing competition, etc. – Wall Street maintains a better-than-expected attitude toward the gambling business.
“The past couple of years, gambling has been a place of safety for investors,” said Chad Beynon, an analyst for Macquarie Capital. “Investors realized this industry is safer than they thought.”
Beynon was part of panel at AGS’ GameOn customer summit Thursday that discussed “The Gaming Market: Wall Street Perspectives.” He was joined by Todd Eilers, principal of Eilers & Krejcik Gaming, and Brad Boyer, vice president of equity research for Stifel Nicolaus.
Boyer said the current strong economy makes many market sectors based on disposable income appealing, and that the gambling industry is part of it.
“I think generally speaking, everyone’s in agreement that the consumer right now is healthy,” Boyer said. “We’re seeing wage and job growth we haven’t seen in a long time. In some markets you’re seeing even scarcity of labor.
“That’s true whether it’s cruise line, a casino or anything else.”
But Boyer adds that he has seen a shift in consumers spending their money on experiential endeavors, rather than buying products.
“There’s an investment themes of experiencing thing, whether it’s going on a cruise or having a night out,” he said. “That’s true, whether it’s Baby Boomers GenXers or Millennials.”
All the panelists agreed that market projections about the possibility of sports betting coming to more casinos are overstated. Beynon told visitors that shortly after the Supreme Court repealed PASPA on May 14, some forecasts had some venues increasing their revenues by $100 million per year.
“But if you look at Open Bet, one of the best platforms in the world for sports gambling, and they generate only $50 million per year,” he said.
Boyer agreed.
“There are people with numbers out there that are just ridiculous,” he said. “To me, there’s so many unknowns at this point. You have to look at tax rate and the integrity fees could be huge.”
They added that sports books in Nevada account for less than 3 percent of the total casino revenues, so the effect of adding sports betting elsewhere remains to be seen. One segment they do see growing, though, are those with business related to sports gambling.
“The way I see it the guys who will unequivocally win are the technology providers,” Boyer said.
