As the market continues to trade near all-time highs, the casino stocks have been absolutely murdered, with much of the damage done after some of the top companies reported very poor results from Macau. Once that hit the tape, the proverbial baby was tossed out with the bath water. Everything gaming related got crushed, and now some of the top companies are on sale.
A new Deutsche Bank research report notes that the volatility for the industry has been stomach churning, but there are some outstanding values trading well below normal valuations.
The report said this:
While second quarter earnings season experienced variances in the direction of earnings revisions (large-cap gaming down, regional gaming up, gaming REITs mixed, equipment suppliers flat, and lodging flat), sector stock moves have been broadly uniform. While the volatility is unnerving, we believe the moves have created some valuation / risk-reward based opportunities.
These three top companies are rated Buy at Deutsche Bank, and all could mean solid gains for risk-tolerant investors.
This top company saw the departure of its namesake founder earlier this year. Wynn Resorts Ltd. (NASDAQ: WYNN) operates Wynn Macau and Encore at Wynn Macau resort located in the People’s Republic of China.
The Macau resorts feature approximately 284,000 square feet of casino space, which offers 24-hour gaming and a range of games, with 458 table games and 708 slot machines, private gaming salons, sky casinos and a poker. Its two luxury hotel towers have a total of 1,008 guest rooms and suites, as well as casual and fine dining in eight restaurants, approximately 57,000 square feet of retail shopping in stores and boutiques, approximately 31,000 square feet of space for lounges and meeting facilities, and the Rotunda show. Recreation and leisure facilities include two health clubs, spas, a salon and a pool.
The company also owns and operates the Wynn Las Vegas and Encore at Wynn Las Vegas resorts, with a total of 4,748 hotel rooms, suites, and villas; 232 table games; 1,866 slot machines; a race and sportsbook and poker room in approximately 186,000 square feet of casino gaming space, including a sky casino and private gaming salons.
Wynn shareholders receive a 2.15% dividend. Deutsche Bank has a $195 price target, and the Wall Street consensus target is $188.25. Shares closed below those levels on Thursday at $139.60.
International Game Technology
This company was hit since doing a secondary in which a large shareholder did a forward sale, and it is offering a great entry point. International Game Technology PLC (NYSE: IGT) is the global leader in gaming. The company enables players to experience their favorite games across all channels and regulated segments, from Gaming Machines and Lotteries to Interactive and Social Gaming.
Leveraging a wealth of premium content, substantial investment in innovation, in-depth customer intelligence, operational expertise and leading-edge technology, International Game Technology gaming solutions anticipate the demands of consumers wherever they decide to play. The company has a well-established local presence and relationships with governments and regulators in more than 100 countries around the world, and it creates value by adhering to the highest standards of service, integrity and responsibility.
Many top Wall Street analysts feel the company will be one of the major gaming infrastructure beneficiaries from the recent Supreme Court ruling allowing sports betting in all 50 states. And it was announced earlier this summer that Fanduel will use the company’s platform for sports betting in New Jersey.
Shareholders receive a 3.95% dividend. The $35 Deutsche Bank price target compares to the $31.50 consensus target and the most recent close at $20.25.
While this is more of a straight lodging play, the company does have Las Vegas properties. Hilton Worldwide Holdings Inc. (NYSE: HLT) is one of the largest hotel owners/operators in the world, with over 5,000 properties and more than 812,000 rooms in 103 countries and territories across 14 major brands. The company maintains a diverse mix of globally recognized brands such as the Waldorf Astoria, Conrad, Hilton, Embassy Suites, Doubletree and Hampton Inn.
Hilton reported second-quarter results above the high end of guidance. The company raised 2018 revenue per available room guidance from +2 to 4% to +3 to 4% and increased EBITDA guidance by $5 million at the midpoint. Management remains bullish on improving fundamentals and a strong pipeline, helped by conversions and international growth.
Shareholders receive just a 0.77% dividend. The Deutsche Bank price target is $95. The consensus figure is $92.81, and shares closed Thursday at $77.24.
These outstanding companies have been absolutely manhandled and could bring some massive gains for patient investors. The key word is patient, as all three will need to bring in solid results for the third quarter and the rest of the year.