Nevada on line casino firms notched gross gaming income (GGR) of $1.315 billion in October, the perfect October on report and the sixth-best month in historical past. However contributions from the nongaming aspect lifted Las Vegas Strip operators.
The Welcome to Las Vegas signal. Nongaming income can assist Strip operators, says an analyst. (Picture: Shutterstock)
Strip operators, corresponding to Caesars Leisure (NASDAQ: CZR), MGM Resorts Worldwide (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN), posted October gross sales of $714 million, a formidable feat when contemplating the month included one much less weekend than it did in 2022. Among the many catalysts was a income improve per obtainable room (RevPAR).
Strip RevPar development in Oct got here in at +13% YoY, whereas visitation elevated 2% YoY (-1% vs 2019). Primarily based on Las Vegas STR information by Nov. 25, we estimate that Strip RevPar development might speed up to ~18% in November, pushed by continued lodging energy on the excessive finish (hyperlink) and F1 for the weekend of Nov. 17-19,” wrote Macquarie analyst Chad Beynon in a notice to shoppers on Friday.
He’s probably onto one thing with that evaluation, as MGM CFO Jonathan Halkyard mentioned on the Financial institution of America Leveraged Finance Convention earlier this week that the Las Vegas Grand Prix weekend was the highest-grossing weekend within the historical past of the operator’s Strip venues.
Las Vegas Strip October Vibrancy Might Result in This fall Beats
A possible optimistic for operators corresponding to Caesars, MGM, and Wynn is that they provide company a plethora of revenue-generating facilities past gaming. That’s essential at a time when it seems as if GGR could have hit a brief high.
That’s to say, Las Vegas Strip operators can proceed posting strong income development and show resilient even when gaming income experiences a modest decline. That resilience additionally dispels the notion that Las Vegas on line casino firms generate the majority of their gross sales from gaming. In actuality, meals and beverage, and leisure stoke extra income than gaming.
That’s essential as a result of gaming income might be unstable, however different sources can easy issues out for Strip operators.
“Assuming comparable market share for MGM, CZR, and WYNN and minimal cyberattack disruptions, we count on MGM and CZR to beat expectations in 4Q for his or her Las Vegas segments,” provides Beynon. “Given the continued resiliency in Vegas, we’re rising our 4Q Strip GGR forecast to -1 % YoY (from -3 % YoY). We now count on +4% GGR development in 2023.”
Particular person Inventory Concepts
Caesars, MGM, and Wynn are the three largest publicly traded Strip operators. Beynon has “outperform” rankings on the primary two, with worth targets implying upside of 45% and 47%, respectively, from present ranges. The analyst has a “impartial” score on Wynn, although his worth forecast on that inventory implies upside potential of 36%.
Of that trio, Wynn is least levered to the Strip, as Las Vegas accounts for 23% of its income. Macau is the largest driver of that firm’s earnings and gross sales.
The Strip accounts for 47% of MGM’s gross sales and 45% of Caesars’ income, in line with Macquarie information.
