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Analyst: Why Penn National And Boyd Could Outperform As US Casinos Reopen

Casino stocks were some of the hardest hit stocks in the market during the coronavirus-driven market sell-off. Casinos are finally starting to open back up in parts of the U.S., but it may still be a long time before things are anywhere close to normal in the

Benzinga · 05/22/2020 19:00

Casino stocks were some of the hardest hit stocks in the market during the coronavirus-driven market sell-off. Casinos are finally starting to open back up in parts of the U.S., but it may still be a long time before things are anywhere close to normal in the gambling world.

Safe Bets?

Bank of America analyst Shaun Kelley recently took a closer look at U.S. regional casino operators to identify where it’s safe for investors to start dipping their toes into the space. Kelley said consumer spending during the economic recovery will vary state-by-state, and different regions of the country will likely perform better for investors.

Bank of America said spending in the Northeast will likely lag other regions, while spending in the Midwest, South and West has been relatively strong in recent weeks.

At the same time, jobless claims are materially lower in the Midwest, while they are relatively high in the West, especially in casino-heavy Nevada.

See Also: Boyd Gaming Vs. Penn National: Which Stock Is The Better Casino Rebound Trade?

How To Play It

Given the Midwest is the only region to outperform the national average in both consumer spending and job loss, Kelley said regional casino stocks Penn National Gaming, Inc (NASDAQ: PENN), Eldorado Resorts Inc (NASDAQ: ERI) and Boyd Gaming Corporation (NYSE: BYD) could be the big winners.

On the other hand, Red Rock Resorts Inc (NASDAQ: RRR) has high exposure to off-strip casinos in Nevada and could lag other operators given the high unemployment levels.

“Historically, employment has been more correlated with off-Strip gaming revenue than consumer indicators and we believe could better reflect the long-term health of NV’s tourism-heavy economy,” Kelley wrote.

Benzinga’s Take

Just because U.S. casinos are starting to open back up doesn’t mean things will be back to normal anytime soon. Macau casinos began opening up back in March, but April gross gaming revenue was still down 97%.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.