Caesars, Penn National Among S&P 500 with Strongest 12-Month Potential

Posted on: August 2, 2021, 10:44h. 

Last updated on: August 2, 2021, 11:02h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming equities are a mixed bag in terms of 2021 performance, and that murkiness is only being enhanced by the recent emergence of the delta variant of the coronavirus.

gaming equities
Caesars Palace on the Las Vegas Strip. The operator is one of three gaming equities that can rally the most over the next year. (Image: Las Vegas Review-Journal)

Year-to-date, the pace of recovery in Macau — the world’s largest gaming center — is far too slow for investors’ liking.  While here in the US, some casino stocks are retreating on delta variant fears, concerns margin expansion isn’t sustainable, high valuation, or that the sports betting thesis that was so attractive in 2020 got too far ahead of itself.

Even with all that, some gaming equities residing in the S&P 500 are among the members of the benchmark domestic equity gauge offering the most upside over the next 12 months, according to CNBC.

The network recently ran a screen of S&P 500 components that need to rally at least 30 percent to reach current consensus 12-month price targets. That group of 10 includes a trio of casino stocks: Caesars Entertainment (NASDAQ:CZR), Las Vegas Sands (NYSE:LVS) and Penn National Gaming (NASDAQ:PENN).

For Caesars, Penn, Imminent Tests

Caesars and Penn joined the S&P 500 in March, becoming the fourth and fifth gaming companies to be included in the index. Sands, MGM Resorts International (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN) are the others.

Penn, the largest regional gaming company in the US, and Caesars have upside of 49.9 percent and 38.9 percent, respectively, relative to consensus price targets, according to CNBC. Those are big percentages. But that pair of operators can make some headway this week, as Caesars delivers second-quarter results tomorrow, with Penn following suit on Aug. 5.

Although the Harrah’s operator resides 23 percent below its 52-week high, it’s still up 17.62 percent year-to-date. Two-thirds of the analysts covering it have bullish ratings on the name. For Penn, those numbers aren’t nearly as bright. The Ameristar operator is lower by almost 21 percent this year, and trades 51 percent below its 52-week high. But 56 percent of the analysts following it have positive ratings on the stock.

Looking at Las Vegas Sands

For different reasons, Las Vegas Sands is in a similarly glum place as Penn. Down 28 percent year-to-date, the largest gaming company by market value is 37 percent below its 52-week high.

Earlier this year, LVS sold its Las Vegas Strip assets, meaning that until it makes an acquisition or opens another venue, its top and bottom lines are entirely dependent on Macau and Singapore. In a normal operating environment, that’d be attractive. But 2021 still isn’t “normal” by gaming industry standards.

Marina Bay Sands in Singapore is closed for another several days for a deep cleaning following a cluster of COVID-19 cases in the city-state. While there are signs Macau gaming revenue and visitation are trending the right way — vital for LVS as the operator of five integrated resorts there — analysts are vexed by the sluggish recovery in the special administrative region.

Sands needs to gain almost 39 percent to reach the average analyst price target, according to CNBC.