It was eerie to see much of the United States shut down over about the past 90 days. Video of Times Square in New York City, the French Quarter in New Orleans and other usually bustling spots around the country showed that they were empty and desolate. Perhaps no other landmark city though looked as odd empty and deserted than Las Vegas.
The Las Vegas strip was totally empty but for a few pedestrians and cars, and at night the towering monoliths to gambling and entertainment stood empty while splashed with light for all still to see. That all changed late last week as the gambling mecca returned to action with social distancing at slot machines, face masks at the blackjack tables and limited capacity in the casinos, but they opened the doors.
Some of the top gaming stocks have already rallied nicely off the March lows, but they still have some big upside potential. We screened the BofA Securities gaming universe for Buy-rated stocks and found four that look like great ideas for the second half of 2020. Remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Boyd Gaming
This has remained a Wall Street favorite for years. 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 was founded in 1973 and is headquartered in Las Vegas, Nevada.
As of March 13, 2019, the company operated 30 gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. It also engages in owning and operating a travel agency.
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 affected by weekends versus weekdays in a period than other gaming markets would be, as a substantial portion of the local economy works in hospitality.
The analysts noted this when the company reported first-quarter results:
Boyd Gaming reported first quarter 2020 adjusted EBITDA of $144 million versus our/Street estimates of $160 Million and $162 million. Management said it expects monthly cash burn during the shutdown of $60 million per month which is slightly better than our estimates. Boyd is well positioned within Gaming given its 1) strong balance sheet, 2) mostly owned real estate and 3) Regionals exposure.
The BofA Securities price target for the shares is $25, and the Wall Street consensus target is $21.64. Boyd Gaming stock closed Friday at $24.61, up over 5% on the day.
Las Vegas Sands
As casinos start to open back up, this is a great long-term play for growth investors. Las Vegas Sands Corp. (NYSE: LVS) develops, owns and operates integrated resorts in Asia and the United States.
The company owns and operates the Venetian Macao Resort Hotel, the Sands Cotai Central, the Parisian Macao, the Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao in Macao, the People’s Republic of China, as well as Marina Bay Sands in Singapore.
It also owns and operates the Venetian Resort Hotel Casino on the Las Vegas Strip and the Sands Expo and Convention Center in Las Vegas. Its integrated resorts feature accommodations, gaming, entertainment and retail malls, convention and exhibition facilities, celebrity chef restaurants and other amenities.
The company has eliminated the dividend and said that it has ended its plans to open an integrated resort casino in Japan. The analysts noted this when the company reported earnings in April:
Las Vegas Sands reported first quarter adjusted property EBITDA of $437 million, well ahead of our model and the Street but still down 69% year over year. Management gave estimated “zero revenue” cash burn figures that are much better than our previous assumptions. The company’s balance sheet and favorable Asia-centric exposures set them up to be one of the most attractive opportunities in Gaming.
BofA Securities has a $61 price target, while the consensus target is $59.06. Las Vegas Sands stock was last seen trading at $52.97 a share.
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