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4 Stocks to Gamble on This Holiday Season: Caesars, MGM Resorts, Penn National, and Boyd Gaming

The delivery of a COVID-19 vaccine and the arrival of the holiday season have given casino operators a new reason to cheer. As travel restrictions ease, their hope is that patrons will begin to return to their favorite casinos. As the industry gets on a path to recovery, Caesars Entertainment (CZR), MGM Resorts (MGM), Penn National Gaming (PENN), and Boyd Gaming (BYD) may well be poised to soar. Let’s take a closer look.

As the coronavirus pandemic forced most people to stay indoors most of this year, all forms of entertainment took a hit. Travelling for pleasure and entertainment slumped, as did the casino industry. Companies managing resorts and casinos saw a drastic decline in revenue due to severely reduced foot traffic.

With the business badly impacted this year by the pandemic, many casino and resort owners ventured into online gambling to tide them over. And while those offering online gaming and gambling experiences have survived, many traditional operators with resorts, hotels and racetracks had little to fall back on during the shutdown.

However, with the emergence of the COVID-19 vaccine, things have started to look brighter for the casino gaming companies. They are optimistic about the return of their patrons and have begun to reopen some of their properties in time for the holiday season.

Meanwhile, online gambling has witnessed a surge as most people continue to remain homebound. Certain traditional casino operators are also planning to venture into online operations. According to Global Market Insights, online gaming is likely to grow at 16.5% CAGR between 2020 and 2026. Disruptive technologies like AI, Machine Learning, VR, and Cyborg are driving this growth. As an increased number of states in the United States legalize sports wagering and online gambling, prospects of this segment look bright.

Caesars Entertainment Corporation (CZR), MGM Resorts International (MGM), Penn National Gaming, Inc. (PENN), and Boyd Gaming Corporation (BYD) will be the direct beneficiaries of the reopening of casinos.

Caesars Entertainment Corporation (CZR)

CZR is one of the largest casino-entertainment companies in the United States. Caesars, Harrah's, Horseshoe, and Eldorado are some of the brands under which the company runs its resorts. CZ offers unique destination experiences, gaming services and various amenities. Currently, it operates more than 50 properties across the country.

CZR is all set to have a new customer engagement channel, which is an Apple App Clip in collaboration with Bottle Rocket, a leading digital experience company. This App clip will allow on-site guests at Caesars Palace Las Vegas to locate their hotel room and do restaurant reservations at Flamingo Las Vegas without the Caesars Rewards mobile app.

Meanwhile, CZR’s property, Harrah’s New Orleans, is all set for a rebrand through a $325 million investment in a 340-room casino-hotel renamed Caesars New Orleans. This property is likely to get renovated by 2024.

During the third quarter ended September 30, 2020, CZR’s revenue climbed 52% year-over-year to $1.4 billion. However, same-store revenue declined 34%. The company reported a loss per share of $6.06 compared to an EPS of $0.47 in the prior-year period. This quarter marked the completion of a merger of Eldorado Resorts, Inc., and Caesars Entertainment Corporation. Also, the company entered a multi-year sports betting partnership with ESPN.

Analysts expect CZR’ revenue for the fourth quarter ended December 2020 to be $1.8 billion, representing a 208.1% increase year-over-year. Meanwhile, its EPS is likely to climb 64.8% in 2021.

On a year-to-date basis, CZR has rallied 17.2% to close yesterday’s trading session at $71.81. Over the past six months, the stock soared 110.2%.

How does CZR stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Overall POWR Rating

The stock is also ranked #1 out of 22 stocks in the Entertainment - Casinos/Gambling industry.

MGM Resorts International (MGM)

MGM is one of the leading operators of entertainment resorts, integrated casinos, and hotels, in Macau and the United States. The company’s portfolio of properties comprises 29 hotel and destination gaming offerings. MGM also owns and operates Primm Valley Golf Club and Fallen Oak golf course. The company also caters to business travelers, conventions, and trade associations in addition to premium gaming customers.

On December 4, MGM’s subsidiary, BetMGM, launched an online Casino in Pennsylvania. This digital experience will offer an exclusive portfolio of online slots and table games to players in the state. These state-of-the-art mobile casino games will be available on iOS, Android and will include desktop slot tournaments, progressive jackpots exclusive to Pennsylvania, Blackjack, roulette, and video poker. During the third quarter ended September 30, 2020, MGM’s net revenues declined 66% year-over-year to $1.1 billion, due to pandemic-led business weakness. The company’s loss per share during the quarter expanded to $1.08 from $0.08 in the prior-year period. However, we think MGM is well positioned to deliver on its long-term strategy of positioning BetMGM as a sports betting and iGaming leader. According to Bill Hornbuckle, the company’s CEO, “We saw sequential improvement in all our markets and several of our regional properties delivered quarterly Adjusted Property EBITDARrecords.”

The Street expects revenue for the fourth quarter ending December 31, 2020 to be $1.6 billion, representing a 50.9% year-over-year decline. However, for 2021, revenue is expected to grow 75.7% to $9.2 billion. Meanwhile, EPS is expected to rise 38.7% in 2021.

MGM lost 9.3% on a year-to-date basis to end yesterday’s trading session at $29.51. Over the past six months, the stock climbed 69.2%.

MGM’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and a “B” for Buy & Hold Grade. Among the 22 stocks in the Entertainment - Casinos/Gambling industry, it is ranked #5.

Penn National Gaming, Inc. (PENN)

PENN owns, operates, and manages gaming and racing properties across the United States. It also offers video gaming terminals focusing on slot machine entertainment. The company offers live sports betting at properties in Indiana, Nevada, Mississippi, Iowa, Pennsylvania, and West Virginia. PENN operates an online casino in Pennsylvania under the brand name iCasino. The company operates 41 gaming and racing properties across 19 jurisdictions.

In November, Penn announced that it is opening the first brick-and-mortar Barstool sportsbook at its Ameristar Casino Resort Spa property in Black Hawk, Co. PENN is also planning to launch its online betting platform, Barstool Sportsbook, in Michigan soon. It is available only in Pennsylvania currently.

PENN’s revenue during the third quarter ended September 2020 fell6.6% year-over-year to $1.3 billion. Its EPS for the quarter rose to $0.93 compared to $0.38 in the same period last year. Ohio and Indiana properties in the Northeast segment and every property in the South region witnessed strong performance. During the quarter, PENN successfully launched the Barstool Sportsbook App to create a new growth channel.

The consensus revenue estimate for the fourth quarter ended December 31, 2020 is $1.1 billion, signaling a 16.3% decline over the prior-year period. EPS is expected to grow at the rate of 36.3% per annum over the next five years.

PENN surged 191.2% year-to-date to end yesterday’s trading session at $79.01. During the past six months, the stock rallied 167.1%.

It is no surprise that PENN is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. In the 22- stock Entertainment - Casinos/Gambling industry, it is ranked #2.

Boyd Gaming Corporation (BYD)

BYD operates as a multi-jurisdictional gaming company across Las Vegas, the Midwest and South. It also operates a travel agency. The company has operations across the country and operates 29 gaming entertainment properties in total.

BYD’s revenue for the third quarter ended September 30, 2020 declined 20.4% year-over-year to $652.2 million. EPS during the quarter fell to $0.33 compared to $0.35 for the same period last year. BYD’s total adjusted EBITDAR climbed 12% year-over-year to $238.8 million. During the quarter, the company expanded its partnership with FanDuel Group by launching mobile sports betting platforms in Illinois and Iowa. BYD also expanded its digital reach to over 30 million adults across the nation.

The Street expects revenue for the fourth quarter ended March 31, 2021 to climb 3.2% year-over-year to $668.1 million. Meanwhile, analysts expect EPS to increase at the rate of 17.9% per annum over the next five years.

BYD ended yesterday’s trading session at $40.72, gaining 37% on a year-to-date basis. During the past six months, the stock soared 101.1%.

BYD’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. Within the Entertainment - Casinos/Gambling industry, it is ranked #4.

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CZR shares were trading at $75.35 per share on Tuesday afternoon, up $3.54 (+4.93%). Year-to-date, CZR has gained 26.34%, versus a 16.32% rise in the benchmark S&P 500 index during the same period.



About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.

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