Caesars and MGM are among the casino stocks that could ride out August's rout
The S&P 500 opened Wednesday with a monthly decline of 1.6%, well below the index's average August performance over the past decade. Travel and leisure stocks, including some widely watched casino stocks, have been among the most despised stocks this month.
After an impressive start to 2023, Caesars Entertainment Inc. (NASDAQ: CZR ), MGM Hotels International (NYSE: MGM ) and Wynn Resorts (NASDAQ: WYNN ) entered Wednesday with double-digit monthly losses. Previously, the three casino stocks had gained an average of 41.33% in the first seven months of the year.
In what could be a positive sign for these names and others in the gaming group, recent days have brought signs of life to the wider stock market, which could be important as September approaches Signal.
On average, the ninth month of the year is one of the worst for stocks. Still, some market watchers believe Caesars, MGM and Wynn may be candidates for a rebound.
Reasons for Casino Stock Recovery
CNBC recently conducted a search for stocks that were up at least 20% in July and down at least 10% this month. Other elements on the screen include a beta of at least 1.25 and upside of at least 10% from the consensus price target.
Caesars, MGM and Wynn all check all those boxes. Beta measures a security's volatility relative to the overall market. Simply put, high-beta stocks tend to outperform the market in both directions, and when their momentum wanes, selling pressure can be intense. Overall, analysts are bullish on three casino stocks, including Wynn, as Macau recovers.
We're still confused as to why Wynn's share price has barely budged over the past six months. "This makes no sense to us," Stifel analyst Steven Wieczynski wrote in a recent note. "We understand this to an extent as the market is concerned about the macroeconomic backdrop in China, but also about the health of U.S. consumers. But based on the fact that we believe China is still at least a year behind the U.S. in terms of recovery, we think Even if there is a slight decline on the Chinese side, there is no reason for demand in Macau to slow down anytime soon.”
Wynn's second-quarter earnings report showed the operator is operating at full speed in Las Vegas and Encore Boston Harbor. Additionally, the company is significantly reducing its mobile sports betting operations, which may result in cost savings.
Speaking of Las Vegas
As the two largest operators on the Las Vegas Strip, MGM and Caesars rely heavily on growth in Las Vegas. Supporting a potential recovery for these casino stocks in September is the fact that they all plummeted in August ahead of the release of Nevada's July gross gaming revenue (GGR) update.
Earlier Wednesday, the Nevada Gaming Control Board (NGCB) reported that Clark County GGR increased 7.5% year-over-year in July to a record $1.208 billion, while Las Vegas Strip GGR was nearly 8.35 One hundred million U.S. dollars.
That number is likely to increase in the coming months with the Las Vegas Grand Prix in November and the Super Bowl next February.
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Source: www.casino.org
