Caesars, MGM top picks as Las Vegas GGR rises, analysts say
As better times continue to arrive on the Las Vegas Strip, Caesars Entertainment Inc. (NASDAQ: CZR ) and MGM Resorts International (NYSE: MGM ) could be adding to the mix in 2024 Investors win stock ideas.
That’s the view of Macquarie analyst Chad Beynon. In a new client note, he reiterated an "outperform" rating on MGM and Caesars, the two largest strip operators. His price targets for Caesars and MGM imply upside potential of 30% and 29%, respectively. Beynon's announcement comes on the heels of red-hot gross gaming revenue (GGR) reports from Nevada casinos in November. This included the strip operator's record GGR and revenue per available room (RevPAR) for the month.
The Vegas Strip generated record revenue of $821 million in November (up 23% year-over-year), driven by strong table gaming revenue (up 62% year-over-year), which we attribute to attracting high-end customers Vegas F1 Weekend and Sphere. ” Beynon wrote.
Caesars and MGM's optimistic outlook comes ahead of New Year's Eve festivities that could see 400,000 or more tourists and locals flock to various Las Vegas casino hotels. If that number is met or exceeded, it will be one of the busiest starts to the new year in Sin City's history.
Caesars and MGM could be winners in 2024
Shares of Caesars and MGM are both trending higher in 2023, with the Flamingo operator up 12.69% and the Bellagio operator up 33.25%.
In MGM's case, it would need to gain 13.31% from the previous month to beat the S&P 500's return of 24.29%. This means Caesars has significantly underperformed the overall market this year. Linq is poised to outperform in 2024 as its digital gaming division becomes more efficient and profitable as it continues to deleverage.
Beynon added that Las Vegas Strip operators could benefit from positive factors such as Formula 1's annual visit to Las Vegas, the maturation of the sphere and the eventual relocation of the Oakland Athletics to the city.
“We believe the future remains bright for Las Vegas with the addition of recurring events such as F1 and Sphere, and eventually Major League Baseball, which will not only increase hotel revenue but drive 2024 GGR growth in 2020 and beyond." noted analysts.“The November results also provide a positive outlook for the first quarter of 2024, which includes Super Bowl LLVIII in Las Vegas, another major celebration that will also attract many high-end clients .”
More Thoughts on Las Vegas Strip Stocks
Among other publicly traded gaming companies with ties to the Las Vegas Strip, Wynn Resorts (NASDAQ: WYNN ) earns a Neutral rating from Beynon. Wynn is significantly less reliant on the Las Vegas Strip than Caesars and MGM because two of its resorts are annexed to Macau, and the stock is widely considered undervalued, having only risen this year 10.48%.
Beynon's price target for Wynn, however, implies 25% upside potential. The analyst is also bullish on Golden Entertainment (NASDAQ: GDEN ), rating the stock an Outperform, with price forecasts implying a potential upside of 29%.
Most of Golden's Strip's exposure comes from the Strat near the Strip, but the operator has entered the local Las Vegas market through two Arizona Charlie's casinos and multiple PT's bars scattered throughout the Las Vegas Valley.
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Source: www.casino.org
