Why Gambling and Casino Stocks May Be 2018's Best Bet Now
Worried about tariffs? Is the U.S. economy poised for a recession in 2019? Are the red-hot FANG stocks due for a huge correction? While there are plenty of reasons to be worried for the summer and the rest of 2018 for sure, one industry got a huge lift recently when the U.S. Supreme Court ruled in the favor of individual states on a case involving the constitutionality defined by a 1992 law, the Professional and Amateur Sports Protection Act, which prohibited states other than Nevada and Delaware from operating sports betting.
With sports gambling now legal in all 50 states, that may open the floodgates for state governments that sorely need additional revenues. Needless to say, some of the top stocks look like they will be big beneficiaries. For growth investors who have grown weary of the constant market tug-of-war, this could be a great place to look for ideas.
Deutsche Bank has been out in front of the potential for the changes in the sports gaming laws, so we scanned the firm’s universe of Buy-rated stocks and found five that look like solid ideas.
This top company remains a Wall Street favorite. Boyd Gaming Corp. (NYSE: BYD) operates as a multi-jurisdictional gaming company through three segments: Las Vegas Locals, Downtown Las Vegas and Midwest and South. The company owns and operates gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.
The company also owns and operates a travel agency and a captive insurance company that underwrites travel-related insurance in Hawaii. As of December 31, 2017, the company owned and operated 24 gaming entertainment properties, offering a total of 1,358,856 square feet of casino space, 30,267 slot machines, 632 table games and 9,372 hotel rooms.
Boyd remains a favorite for Las Vegas locals and is substantially levered to the Las Vegas market. The company generally targets largely locals in this market. The company’s downtown properties also draw Hawaiian tourists. In general, Las Vegas locals performance is less impacted by weekends versus weekdays in a period than other gaming markets would be, as a substantial portion of the local economy works in hospitality.
Investors are paid a 0.53% dividend. The Deutsche Bank price target for the shares is $44, and the Wall Street consensus target is $36.06. The shares closed Thursday at $37.75.
This company has a diverse property portfolio, with casinos and resort stretched across the country. Eldorado Resorts Inc. (NYSE: ERI) is a gaming and hospitality company that owns and operates gaming facilities located in Ohio, Louisiana, Nevada, Pennsylvania and West Virginia.
Eldorado Resorts owns and operates approximately 503,000 square feet of casino space with approximately 20,000 slot machines and video lottery terminals, over 550 table and poker games, 45 restaurants and 6,500 hotel rooms. As of December 31, 2016, the company owned and operated various properties, including Eldorado Resort Casino Reno (Eldorado Reno), Silver Legacy Resort Casino (Silver Legacy), Circus Circus Reno (Circus Reno), Eldorado Resort Casino Shreveport (Eldorado Shreveport), Mountaineer Casino, Racetrack & Resort (Mountaineer), Presque Isle Downs & Casino (Presque Isle Downs) and Eldorado Gaming Scioto Downs.
The company also reported a strong quarter, with EBITDA growth and cost savings being among the highlights for investors. Many analysts cite the casino’s proximity to the red-hot Reno and Blackhawk markets as a big positive.
Deutsche Bank has a $48 price objective, and the posted consensus target is $49.11. The stock closed Thursday at $45.20.