Las Vegas Sands and MGM could be among the cyclical spending stars in 2024
Consumer Discretionary stocks, including select gaming stocks, are doing well in 2023, as the S&P 500 Consumer Discretionary Index's 40% return this year shows. Some analysts believe there could be a sequel next year.
That could be a boon for some casino stocks, including Las Vegas Sands (NYSE: LVS ) and MGM Resorts International (NYSE: MGM ). Citi Research highlights buy and sell ideas for 2024 across 11 Global Industry Classification Standard (GICS) industries in a new report. In the consumer discretionary space, Sands and MGM ranked them as two of next year's top five creatives.
LVS and MGM are the only bookmakers among the five that do not feature stocks in the sector among the six companies with the worst expected total returns (ETR) in 2024. Citi noted that there are concerns that "the best parts of fundamental elasticity have fallen behind as margins, sales, profits and cash flow slow." Expectations for these factors remain strong in 2024, the bank added.
Citi projects 2024 ETRs of 54% for Sands Corp. and 44% for MGM, which puts the stocks third and fourth on the bank's list of top consumer cyclical ideas for 2024.
Other game titles can boost sales
Entering this year, Sands, the largest casino operator by market capitalization, received a number of bullish calls, with sellers betting that the stock's underperformance this year created a value opportunity.
Analysts are also looking at several other gaming companies as possible contributors to the consumer cyclical sector's rise in 2024, including domestically focused companies like Caesars Entertainment Inc (NASDAQ: CZR ).
We expect overall travel and leisure demand to be relatively resilient, albeit with varying periods of weakness as consumers become more discerning about their budgets," Barclays analyst Brent Montour said in a new note stated in the report.
Montour pointed to Caesars' strong free cash flow and what he called an undervalued "deleveraging story" and said the Linq operator was one of his top travel and leisure picks for 2024, adding that the operator's digital , Las Vegas and regional casino operations are all poised to grow next year.
Barclays is also bullish on the University of Pennsylvania
Excitement for the stock is growing given the impressive recent launch of Penn Entertainment's (NASDAQ: PENN ) mobile sports betting app, ESPN Bet.
After a dismal performance last year, Penn State is unlikely to succeed in 2023. But with shares up 12% in the past 90 days, it's the casino stock Montour is most confident about next year. The stock's consensus price target implies more than 21% upside potential from current levels.
"Our favorite play name in 2024 is PENN, as ESPN BET's early success is undervalued and the risk-reward profile for PENN stock is asymmetric even with modest success," the Barclays analysts concluded.
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Source: www.casino.org
