Gambling revenues continued to rise on the Las Vegas Strip by 11.62% year-on-year (YoY), reaching $731.5 million. Tourist-dominated markets were up, with local ones slightly down, indicating that pent-up demand due to Covid restrictions is now positively affecting the casinos’ attendance.
Strip slot revenue increased by 36% to $391 million, with other table games growing by 19% to $209 million. These results now represent a month-on-month increase as April also saw positive developments and gambling increases.
However, the occupancy rates are still trying to catch up with the pre-covid levels, while average daily room rate (ADR) and revenue per available room (RevPAR) have shot past the pre-covid levels, possibly indicating that inflationary pressures have brought on increased prices, which translates into more earnings per fewer rooms rented.
Picks for you
Accordingly, Finbold has identified two stocks that stand to benefit from the increase in spending on the Las Vegas strip.
Red Rock Resorts (NASDAQ: RRR)
The company has had a bumpy ride behind it since the Covid pandemic caused havoc on its business strategy. This has led to a decrease in valuation, and the stock might look cheap when measured by the price to earnings (P/E) ratio.
On May 3, the company posted its earnings, reporting revenue of $401.6 million, a year-on-year increase of 13.9%; however, missing revenue expectations by $6.72 million. On the other hand, earnings per share (EPS) were $0.77, beating expectations by $0.07.
Meanwhile, shares of the company are down 36.8% year-to-date (YTD), currently trading below all daily Simple Moving Averages (SMAs) on lowered volume. In June, the shares are trading in a wide range of $41.2 and $31.5, looking to break above and possibly reverse the downward momentum.
On the other hand, analysts rate the shares a strong buy, with the next 12 months’ price predictions reaching $55.83, 67.36% higher than the current trading price of $33.36.
Golden Entertainment Inc. (NASDAQ: GDEN)
A peculiar thing occurred as it seems that the pandemic benefited the company’s fundamentals. Namely, the occupancy rate is lower than in pre-pandemic days; yet, the company had its best financial performance in five years.
During its earnings report on May 5, the firm posted revenue of $273.6 million, a YoY increase of 14.1%, missing earnings expectations by $9.35 million. Further, the EPS was $1.12, beating expectations by $0.60.
Additional positive news coming out of the earnings is that the company reduced its net debt compared to earnings to a level lower than it was in the past six years.
Nevertheless, GDEN stock is down 22% YTD, with most of the losses coming from April 2022 onwards, to now trade at April 2021 lows of $39.55. Moreover, shares are below all daily SMAs, trading in quite a wide range in June from $50 to $39.
Meanwhile, analysts rate the shares a strong buy, predicting that in the next 12 months, the average price could reach $64.50, 63.08% higher than the current trading price of $39.55.
Finally, with the increased spending on gambling, especially on the Las Vegas Strip, the above two companies could benefit and grow their shareholders’ value.
Shrewd investors could track room occupancy levels to best gauge when would be an appropriate time to invest, though given that they’re almost back at pre-covid levels, timing it right will be almost impossible.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
