Analysts recommend these gambling stocks in 2021.
The gambling industry has been one of the hardest hit by the pandemic in 2020, and casinos were especially affected during the economic shutdown. Destinations such as Las Vegas and Macao have had a particularly difficult struggle due to travel restrictions. At the same time, the pandemic accelerated the shift to U.S. online gambling and sports betting apps, which have been rolling out on a state-by-state basis since a key 2018 Supreme Court ruling overturned a federal ban on sports gambling. Here are Bank of America analysts’ top gambling stocks to buy in 2021.
Boyd Gaming Corp. (ticker: BYD)
Boyd Gaming operates 30 casinos in 10 U.S. states, including 11 casinos in the Las Vegas area. Analyst Shaun Kelley says Boyd’s first quarter was its strongest ever as a public company, reporting earnings before interest, taxes, depreciation, amortization and restructuring or rent, known as EBITDAR, at 31% above consensus analyst estimates and 28% above pre-pandemic peak levels. Pent-up demand and government stimulus payments were major growth drivers. Kelley says Boyd has a superior financial profile compared to peers and has a longer-term sports betting upside. Bank of America has a “buy” rating and an $80 price target for BYD stock.
Churchill Downs Inc. (CHDN)
Churchill Downs owns its namesake horse race track, the Kentucky Derby, and more than a dozen other U.S. regional casinos and racetracks. Kelley says Churchill shares should trade at a premium valuation to both their historical average and U.S. gaming peers, given the company’s unique assets, its race machine expansion, an impressive growth pipeline and the TwinSpires online gambling platform. In the first quarter, Churchill Downs reported 28% revenue growth and 100% growth in adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, a key measure of profitability. Bank of America has a “buy” rating and a $250 price target for CHDN stock.
Gaming and Leisure Properties Inc. (GLPI)
Gaming and Leisure Properties is a triple net lease real estate investment trust, or REIT, that owns 44 casino properties throughout the U.S. that it leases to casino operators. Kelley says Gaming and Leisure’s new relationship with Bally’s Corp. (BALY) has already produced more than $60 million in annual rent and $500 million in acquisition financing. The company has a track record of creatively structuring and sourcing deals, and Kelley says it is building and diversifying its stable of tenants while paying investors a 5.7% dividend. Bank of America has a “buy” rating and a $55 price target for GLPI stock.
Penn National Gaming Inc. (PENN)
Penn National Gaming operates 41 casinos and other facilities throughout the U.S. and Canada and has a 36% ownership stake in Barstool Sports. In June, Penn announced a $400 million offering and updated its second-quarter guidance. Kelley says the updated guidance suggests Penn is on track for another record quarter of EBITDAR. Revenue is on track to gain 10% from 2019 levels, excluding online ad pass-through revenue. Kelley says Penn might use its large cash position to gain additional control over its technology stack. Bank of America has a “buy” rating and a $110 price target for PENN stock.
VICI Properties Inc. (VICI)
VICI Properties is a triple net lease REIT that was spun off from Caesars Entertainment Inc. (CZR) in 2017 and owns multiple casinos, hotels and racetracks, along with four golf courses, throughout the U.S. Kelley says VICI is generating “best-in-class growth” among gaming REITs. He says the company’s $6.25 billion acquisition of the Venetian Las Vegas from Las Vegas Sands Corp. (LVS) announced in March is an “unequivocal positive,” given that the Venetian is one of the largest and highest-quality gaming assets on the Vegas Strip. Bank of America has a “buy” rating and a $36 price target for VICI stock.
Wynn Resorts Ltd. (WYNN)
Wynn Resorts owns and operates casinos in Las Vegas; Macao; and Everett, Massachusetts. Kelley says the Las Vegas market is rebounding well from last year’s shutdown. In May, Wynn announced that it is spinning off its Wynn Interactive online gaming division and merging it with a special-purpose acquisition company that will trade under the ticker WBET. Wynn investors will retain a 58% ownership stake of the new company. Kelley says the deal will help unlock value in WynnBET and provide much-needed funding for its growth. Bank of America has a “buy” rating and a $145 price target for WYNN stock.
Melco Resorts & Entertainment Ltd. (MLCO)
Melco Resorts & Entertainment owns and operates several integrated casino resorts in Macao and the City of Dreams resort in Manila, Philippines. Melco’s primary market of Macao has been a laggard in the gaming space in 2021, due in part to a COVID-19 outbreak in Guangdong, China, in May that triggered local travel restrictions. Analyst Billy Ng says Melco’s markets may be slower to recover than the U.S. market, but its recovery may outpace Macao as a whole given Melco’s strength in the premium mass market. Bank of America has a “buy” rating and a $23.20 price target for MLCO stock.
Seven best gambling stocks to buy:
— Boyd Gaming Corp. (BYD)
— Churchill Downs Inc. (CHDN)
— Gaming and Leisure Properties Inc. (GLPI)
— Penn National Gaming Inc. (PENN)
— VICI Properties Inc. (VICI)
— Wynn Resorts Ltd. (WYNN)
— Melco Resorts & Entertainment Ltd. (MLCO)
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