Gaming Industry to Sustain Stellar Show in 2018: 4 Solid Buys

The casino gaming industry has been experiencing stellar growth since the second half of 2016. The bullish trend is expected to continue through 2018 and beyond. According to Research and Markets, the global casino gaming market is anticipated to witness CAGR of 10.16% in the 2017-2021 period. Technavio estimates that the U.S. casino gaming market will witness CAGR of close to 5% from 2017 to 2021.

Recent numbers published by The Macau Gaming Inspection and Coordination Bureau are also encouraging. In February 2018, gross gaming revenues increased 5.7% year over year to roughly $3 billion or 24.3 billion patacas. This marked the 19th month of consecutive gains and the third highest in the past year.

Although Nevada’s casino gaming win dropped by 2.1% in January, it crossed the $1 billion mark. Notably, it was the first time in the past 12 months that revenues were in excess of $1 billion.

Despite the fact that demand in the space is relatively inelastic and a fixed range of consumers will continue to demand services irrespective of market conditions, there are good reasons why growth should persist over the next few years.

Improving Tourism Dynamics

Destinations like Las Vegas and Macau are gambling hotspots. The popularity of entertainment and gambling, in both hotels and casinos, has in fact aided these cities form a tourism economy unlike any other place on earth.

The Chinese government is considering measures to support all aspects of Macau’s economy and introduce favorable policies. These are expected to improve visitation pattern and boost tourism and traffic in the region. One such move is the approval of Macau’s maritime expansion plans that are expected to aid shipping and tourism and mainland Chinese cities to offer multi-entry permits. Per the Macao Government Tourism Office (MGTO), total visitations to Macau in 2017 increased 5.4% from 2016.

Though tourism in Las Vegas has not yet reached pre-recession levels, it is on its way to recovery. Per the year-end report from the Las Vegas Convention and Visitors Authority, total visitors were down 1.7% year over year in 2017. However, convention attendance increased.

Governments Reducing Restrictions

Given the prospects of taxes (as high as 25%) on earnings and the fact that the gaming industry employs a large number of people, governments across the world are moving to reduce restrictions on gambling.

In Nevada, the government has been lowering restrictions. Also, there is a new bill that could lower the legal gambling age limit from 21 to 18 years. In few states, for games such as bets on horse racing in Arkansas, Delaware, Florida, Indiana, Louisiana, Maine, New Mexico, Ohio, Pennsylvania and Washington, the legal age is already 18 years.

Gambling remains illegal in Brazil and Japan but governments in both these countries are growing more receptive to the idea, which is a positive development for the industry.

Tribal casinos in Alaska, Idaho, Minnesota and Wyoming are also legal for 18-year olds. Although the age group is not likely to have a lot of extra cash, this could expose them to gambling at an earlier age thereby increasing potential revenues for the industry in the future.

Having More Money to Spend

Per numbers provided by the U.S. Bureau of Economic Analysis (BEA), real disposable income rose through 2017. While it peaked in June and dropped thereafter owing to the impact of hurricanes Harvey and Irma, it has risen again and remains much higher than it was a year ago.

Latest estimates from BEA suggest that personal income was up $64.7 billion (0.4 %) in January. Disposable personal income (DPI) rose $134.8 billion (0.9%) and personal consumption expenditures (PCE) was up $31.2 billion (0.2%). This is a positive for the gaming market as it indicates that people have more money to spend on leisure.

The Japan Expansion

Japan is likely to hold the key for casino companies in 2018. The country is expected to approve two more gaming licenses in the year. Estimates indicate that Japan’s market could be worth $40 billion. Major casino players have made Japan their top priority for 2018, with Las Vegas Sands Corp. LVS coming up with an outlay of around $10 billion for building a single resort.

4 Stocks to Bet On

With the help of the Zacks Stock Screener, we have zeroed in on four promising stocks in the gaming industry that have a Zacks Rank #1 (Strong Buy)  or Zacks Rank #2 (Buy) and have solid expected earnings growth rate for 2018 as well as 2019.

Eldorado Resorts, Inc ERI)

Eldorado Resorts provides casino and entertainment services, primarily in Nevada and Louisiana.

The company carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last 60 days, earnings estimates increased 19.9% for 2018 and 24.6% for 2019. The bottom line is projected to grow 19200% and 18.3% in 2018 and 2019, respectively.

Eldorado Resorts, Inc. Price

Eldorado Resorts, Inc. Price | Eldorado Resorts, Inc. Quote

Wynn Resorts Limited WYNN)

Wynn Resorts develops, owns, and operates destination casino resorts. The company carries a Zacks Rank #2.

In the last 60 days, the Zacks Consensus Estimate moved up 16.2% for 2018 and 24.6% for 2019. Earnings are projected to grow 42.1% and 20.2%, respectively, in 2018 and 2019.

Wynn Resorts, Limited Price

Wynn Resorts, Limited Price | Wynn Resorts, Limited Quote

Churchill Downs Incorporated CHDN

Churchill Downs operates as a racing, gaming, and online entertainment company in the United States.

Churchill Downs carries a Zacks Rank of 2. In the last 60 days, the company’s EPS estimate climbed 11.4% for 2018 and 14.3% for 2019. The bottom line is anticipated to grow 93.5% and 15.7% in 2018 and 2019, respectively.

Churchill Downs, Incorporated Price

Churchill Downs, Incorporated Price | Churchill Downs, Incorporated Quote

Las Vegas Sands Corp.

Based in Las Vegas, NV, Las Vegas Sands is a leading international developer of multi-use integrated resorts primarily operating in the United States and Asia.

Las Vegas Sands carries a Zacks Rank #2. In the last 60 days, the company’s earnings estimates have moved up 9.5% for 2018 and 13.6% for 2019. Earnings are projected to increase 9.9% and 7.8% in 2018 and 2019, respectively.

Las Vegas Sands Corp. Price

Las Vegas Sands Corp. Price | Las Vegas Sands Corp. Quote

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