Caesars, MGM Preferred Picks as Las Vegas GGR Soars, Says Analyst

Posted on: December 29, 2023, 05:08h. 

Last updated on: January 1, 2024, 12:24h.

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

With the good times rolling on the Las Vegas Strip, Caesars Entertainment (NASDAQ: CZR) and MGM Resorts International (NYSE: MGM) could be winning equity ideas for investors in 2024.

Las Vegas Strip Nevada gaming revenue GGR
People take pictures in front of the “Welcome to Fabulous Las Vegas” sign. An analyst is bullish on shares of Strip operators Caesars and MGM. (Image: Getty)

That’s the take of Macquarie analyst Chad Beynon. In a new report to clients, he reiterated “outperform” ratings for MGM and Caesars — the two largest Strip operators. His price targets on Caesars and MGM imply upside of 30% and 29%, respectively. Beynon’s note arrived on the back of a blistering hot November gross gaming revenue (GGR) report for Nevada casinos. That includes a record month of GGR and revenue per available room (RevPAR) for Strip operators.

The Vegas Strip generated record revenue of $821m in November (+23% year-over-year), driven by strong table revenue (+62% year-over-year) which we attribute to higher end customers drawn to Vegas for F1 weekend and the Sphere,” wrote Beynon.

The bullish outlook on Caesars and MGM arrived just ahead of New Year’s Eve festivities, which could see 400,000 or more visitors and locals make their way to various Las Vegas casino hotels. Should that number be met or surpassed, it’d represent one of the busiest starts to a new year in Sin City history.

Caesars, MGM Could Be 2024 Winners

Shares of Caesars and MGM delivered upside in 2023, with the Flamingo operator rising 12.69% and the Bellagio operator rising 33.25%.

In the case of MGM, it took a 13.31% gain over the past month for that stock to beat the 24.29% returned by the S&P 500. That is to say, Caesars badly lagged the broader market this year. The Linq operator has catalysts for potential outperformance in 2024 as it continues slashing debt and as its digital gaming arm becomes more efficient and profitable.

Beynon added that Strip operators could see ongoing benefit from Formula One’s yearly visit to Las Vegas, maturation of the Sphere, and the Oakland Athletics’ eventual move to the city, among other bullish factors.

“We maintain that the future remains bright in Vegas with the additions of recurring events like F1 and the Sphere and eventually the Major League Baseball which not only bring in additional hotels revs but can be drivers of GGR growth in 2024 and beyond,” noted the analyst. “November’s results are also a positive read-through for 1Q24, which includes Vegas hosting Super Bowl LVIII, another major marquee event which will also attract lots of high-end customers.”

Other Ideas Among Las Vegas Strip Stocks

Among the other publicly traded gaming companies with Strip exposure, Wynn Resorts (NASDAQ: WYNN) garnered a “neutral” rating from Beynon. Because of its two Macau integrated resorts, Wynn is significantly less dependent on the Strip than are Caesars and MGM, and the stock is widely viewed as undervalued after gaining just 10.48% this year.

Still, Beynon’s price target on Wynn implies upside of 25%. The analyst is also constructive on Golden Entertainment (NASDAQ: GDEN), rating that stock “outperform,” with a price forecast that implies potential upside of 29%.

The bulk of Golden’s Strip exposure is sourced via the Strip-adjacent Strat. But the operator taps into the Las Vegas locals market through two Arizona Charlie’s casinos and a slew of PT’s Pubs strewn across the Las Vegas Valley.