Regional casinos looked poised to continue their recovery from the Covid-19 crisis in the fourth quarter—until infection rates began jumping again. Yet as Truist Securities notes, that may not matter for investors, who are already looking forward to a post-vaccine world.
Analyst Barry Jonas notes that gross gaming revenue for October was down 13% year over year, excluding the Las Vegas strip, a fairly consistent reading from September levels. That’s no surprise, given that several companies had highlighted October strength in their third-quarter earnings calls. In addition, initial November data showed consistent weekly gains—until last week.
That reversal of course is likely directly tied to rising Covid-19 cases across the country, which has brought new restrictions in many states, and wariness from consumers even in regions that haven’t rolled back reopening. That means that while positive October and early November data had been positive, the most recent increase in infections have changed the fourth-quarter outlook for the negative, Jonas writes.
However, that may not actually matter much, he notes. “We think investors will look through this and ultimately focus on: 1) post-vaccine pent-up demand, 2) post-election and 3) sports betting upside.”
That leads him to raise his price targets on Caesars Entertainment (CZR) to $85 from $70, on Monarch Casino & Resort (MCRI) $65 from $60, and on MGM Resorts International (MGM) to $32 from $22. He has Buy ratings on Caesars and Monarch, but a Hold rating on MGM
