What happened
Shares of casino stocks had a good week, climbing double digits in some cases. The industry continues to get positive news from U.S. gambling sites, led this week by MGM Resorts International (MGM 0.84%) reporting earnings.
According to data provided by S&P Global Market Intelligence, the biggest stock move this week was Penn National Gaming (PENN 2.08%), which traded 10.7% higher for the week as of noon ET on Friday. MGM's neighbor Caesars Entertainment (CZR +1.53%) was up 9.7% for the week, while Wynn Resorts (WYNN +2.75%) jumped 10.7%. Ironically, MGM was only up 6.2% for the week.
Image source: Getty Images.
So what
MGM has casinos in Las Vegas, regional resorts across the U.S., and Macao, so it's a great bellwether for the industry overall. That means results can sway the industry higher or lower and this week we saw that upside.
Las Vegas Strip revenue jumped an incredible 277% for MGM Resorts to $1.8 billion and was up 26% from the same quarter in 2019, before the pandemic. Visitors have come back in droves and even the omicron variant of COVID-19 wasn't able to slow the market.
Regional operations saw a 51% increase in revenue to $900 million and were flat with 2019. But it's worth noting that cost reductions put in place during the pandemic are holding up well and property earnings before interest, taxes, depreciation, amortization, and restructuring (EBITDAR) rose 36% from the fourth quarter of 2019 to $309 million, despite flat revenue.
Macao was the one downside with revenue only up 3% from a year ago to $315 million, a 57% decrease from 2019. Restrictions related to COVID-19 remain in place in Macao, so while U.S. gamblers have returned in droves, Asia has not.
Now what
What does all of this mean for Wynn Resorts, Penn National, and Caesars? Investors are speculating that results for the U.S. operations of these companies will be strong as well. Caesars has a similar U.S. footprint as MGM with properties in Las Vegas and a number of regional locations. So, it's likely they're going to see strong growth.
Penn National is a regional gaming company and if it can see similar margin expansion to MGM it could have very good results as well.
Wynn's position is a little more complicated with properties in Las Vegas, Boston, and Macao. Macao will likely be weak, but if Las Vegas and Boston can be cash-flow machines it may overshadow Macao, for now.
I think this week's reaction was the market's realization that gambling and entertainment spending is back in a really big way in the U.S. That could drive not only a great year in 2022, but also improve results for the industry in the coming decade because very little new supply is slated to hit the market.
