Online Gambling Stocks To Buy
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*Online Gambling Stocks To Buy
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DraftKings (DKNG, $53.19) has been a public company for less than half a year, but it already has made a mark on both sports betting stocks and special purpose acquisition companies (SPACs). After the Supreme Court ruling, one Bank of America/Merrill Lynch analyst upgraded the company from “neutral” to “buy” and raised its share price target. With record revenues of $2.38 billion in 2017, Boyd has the resources to move quickly into sports gaming once it becomes widely legal.Allstar Gambling USA / News / Top 5 Gambling Stocks 2020Allstar GamblingJanuary 18, 2020TwitterFacebookWhatsApp
The Supreme Court of the United States of America in a landmark judgment given in May 2018 declared that the Federal law that allowed gambling of legalized sports in the country no longer stands constitutional. It was held that the law is violative of the 10th amendment. It was now declared that gambling in sports could now only be sanctioned and approved by states and is not under the purview of the Federal Government. This only resulted in a predictable sports insurgency.
In October, New Jersey had over $250 million involved in betting and this was a significant increase in 41% on betting as compared to how it was just a month before. Many other states are following the same pattern as gambling in legal sports reaches a new high. These include The Garden State, New Mexico, Pennsylvania, Rhode Island, Delaware and Mississippi among others. It is predicted that by the year 2022, all around the world, sports fans will be having as much as $1 trillion invested in online betting per year.Five gambling stocks with great potential in 2020
Given below are five gambling stocks that one should keep an eye on in regard to gambling in legalized sports.1. MGM Resorts (NYSE:MGM)
Betting on a small scale in sports is considered unimportant and insignificant in Las Vegas, USA. This comes into picture when we compare blackjack gains of $1.24 billion to actual gains of $329.1 million as extracted from legal sports. However, the news is that the chief chain of casinos to prime timing. This major casino hand in the United States alone generated over $4 billion of revenue in the city of Vegas. However, it also has its working in the Atlantic City but it overtook a proportion of the Casino Empire in the city of New York. It now has a substantial mark in the betting arena of sports having a rank of $114 million which accounts to be 35% in the betting world. MGM holds a market grab of $13.5 billion. It is utilizing its monetary strength to turn around the sports world when it comes to betting. The casino major has introduced betting in sports in two casinos in the Mississippi and has finally emerged as the “authorized gaming counterpart” of the NBA.
MGM Resorts has finalized deals with the most significant and prime leagues of the country. These include basketball, hockey, and baseball at the professional level. The leagues permit MGM to cross-advertise the casinos belonging to the company and also promoting the app for sports betting. It is important that note that MGM has only been possible in regulating bets in states where the action was previously legal. Till now, the biggest reward lies with the National Football League. MGM presently has a great hold of success and plans of having Philadelphia Eagles and Pittsburgh Steelers involved in sports betting, following which each game will be a fair play.2. BRAGG (BRAG. V BKDCF)
The BRAGG Gaming Group was earlier known as Breaking Data Corporation. It has onlookers as large as 31 million virtue of its media asset, Give me Sport (GMS). It even has an internet connected playing the stage that is famous worldwide and is known by the name, Oryx gaming. Through Oryx Gaming aims to influence the GMS viewers into gaining power and emerging as the biggest betting of sports gaming customer record on the planet. The path of online gambling gives surprising levels of profit. Studies show that the gross rewards in the market through gambling in 2018 were $46.7 billion. It is predicted that the amount will go up to $89 by the year 2025.
The Facebook profile of GMS has as much as 26 million active user accounts. If this data is compared with ESPN, we see that even a significant sports brand as ESPN has only 19 million users on its Facebook page while its total worth amounts $28 million. If we talk about Sky Bet, the property was just sold off for %5.7 billion and only had 819,000 people as its audience. This has only led Oryx Gaming Services to introduce a GMS in order to have only one platform focusing on Sports Betting. Once the OGS is launched online it will incorporate the OGS technology with GMS to bring out an amazing experience to all the BRAG’s users.
Today, it is noticeable that BRAGG has two key possessions GMS and Oryx. The former has had an increased revenue earning of over 400%. The per month traffic online has also added by more than 5 million and additional revenue growth of 30%. It is believed that that BRAGG can grab eyes of its possible audience; it can bring to large monetary gains to the company. It can even come out as an important success story of this year.3. International Game Technology (NYSE:IGT)
After having an unsure revenue through the year where the company had a significant one-year increase of $31 to a decrease of $14 by November. It is only in December that the numbers found an equilibrium at $16. It has a market hold of $3.4 billion and 12,000 employees and is known to be a big company that produces a significant amount of casino playing equipment and machine for slots, more than any other company. But now the company is evolving and embracing betting in sports. Since IGT is a service provider it shall not have to worry about the risks of maintaining books of sports. It merely needs to complete the requirements of companies like MGM and infrastructural construction that help in encouraging sports.
In 2017, IGT was managing money worth $12 billion being used in sports betting. It is advisable for IGT to be safer so that safely all the bets are placed by potential investors in the year 2019. In July 2018, IGL claimed to have started a collaboration with the famous betting company FanDuel. As per the collaboration, IGT will be responsible for bringing FD’s ongoing betting mechanisms to markets in 15 states of the country. IGT will also launch PlayShot that will use FD’S consumer looking and waging technology and provide service to people who bet in sports. FD wishes to use the technology of the very famous IGT to establish a remarkable footing in the world of betting in sports. Hence, it is predicted that after an uneasy year, IGT’s hard work and luck will finally pay off in 2019.4. BOYD Gaming Corporation (NYSE:BYD)
The company is a significant and huge casino regulator in the United States and is the owner of 29 gaming possessions in 10 states. It is coming out to be a big character when it comes to sports gambling.
The previous decade, Boyd has shown unusual skills that have contributed positively to the company. It has dealt with a lot of sports books in the City of Sin. Since betting is considered legal it is planning to expand to different regions and their markets.
The firm has also come into collaboration with MGM as per which they will be equal partners in online and offline (mobile) gambling mechanisms. MGM is proposing its poker and playing applications for 15 states under sportsbook of Boyd’s. The deal is unexpected and can be the start of a huge gaming monopoly together owned by Boyd and MGM. B’Connect is Boyd’s new application for gaming and is used in 3 casinos. It has also signed a work project with FanDuel and offered to lend out its gaming characteristics for FD’s mobile and internet-abled gambling services. The contract allows for Boyd to have authority over all the states where it possesses licenses for gaming, other than Nevada.5. Marriot International (NASDAQ:MAR)
Marriot serves as the biggest hotel businesses in the world. The hotel brand has a lot of collaborations with casinos and is even partners with them. Presently, MGM and Boyd wish to collaborate with Marriot to use their customer turn out to their own advantage and attract extra business. Marriot is significant all over the country and has deals relating to license with JW Marriot Resort & Spa located in Las Vegas. Recently, after all the negative publicity the hotel chain is facing, the company gave a statement regarding the building of a casino and resort with 4000 rooms. The negative attraction due to scandalous reported a breach of data. But the company has been patient in moving forward and strategized well to come out and claim over the market all over again.
Another company expected to have increased growth since gaming starts again:Online Gambling Stocks To Buy6. Millenial eSports Corporation (OTCQB:MLLLF)
It is a small-scale firm located in Toronto with its main focus on E-Sports and E-Gaming. The company works on all- creation of content, data analysis, media and broadcasting, and, tools for execution. The firm introduced analytics and intelligence in business items for industry relating to e-gaming. It has even started working on the preferences on Aston Martin and McLaren, Motorola G and Formula E which are mainly based on mobile gaming arena.Join MYB Casino now! The NO-nonsense USA gambling site!Bonus:
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Updated on September 14th, 2020 by Bob Ciura
As the saying goes, the house always wins. Casinos operate strong business models, as casinos earn a virtually guaranteed profit from the sum of the bets they receive. The relatively attractive economics of casinos make the industry worthy of a closer look.
Investors may be particularly intrigued by the earnings growth and dividends of the major casino stocks. The 4 major publicly-traded casino stocks all pay dividends to shareholders, but they are far from the safest dividend stocks around.
If you are looking for a safer basket of dividend growth stocks, consider the Dividend Aristocrats. They are an elite group of 65 stocks in the S&P 500 Index with 25+ years of rising dividends.
You can download an Excel spreadsheet of all 65 Dividend Aristocrats (with important financial metrics such as dividend yields, P/E ratios, and dividend payout ratios) by clicking the link below:
Click here to download your Dividend Aristocrats Excel Spreadsheet List now.
Casinos are not without a fair amount of risk. Casinos are highly vulnerable to recessions, as consumers typically cut back heavily on gaming when the economy enters a downturn. The four major casino stocks saw their earnings collapse during the Great Recession. A similar impact has taken place to start 2020 due to the coronavirus crisis, which has battered the casino industry.
We have analyzed the major casino stocks in the Sure Analysis Research Database, which ranks stocks based upon the combination of their dividend yield, earnings-per-share growth potential and valuation to compute expected total returns. In this article, we will compare the expected 5-year total annual returns of the four major casino stocks.Table Of Contents
For this article, stocks are ranked in order of least attractive to most attractive. While 5-year expected returns are incorporated in the rankings, we have also utilized a qualitative screen based on balance sheet strength and overall business quality.
You can instantly jump to a particular section of the article using the links below:Casino Industry OverviewOnline Gambling Stocks To Invest In
The casino industry is in severe distress right now. The spreading coronavirus and resulting global recession have taken their toll on the casino stocks. The large U.S. casinos are heavily reliant on Macau, the largest gaming market in the world and the only market in China where casinos are legal. As a result, these stocks are very sensitive to any developments that affect the gaming activity in Macau.
This was a significant concern several years ago. In 2014, China initiated an anti-corruption regulatory crackdown, which greatly reduced the gaming activity in the area. Fortunately for the casinos, the downturn lasted for approximately two years and gaming activity in Macau recovered thereafter. Then the gaming activity in Macau faced another headwind, namely the trade war between the U.S. and China.
This headwind lasted for only about a year but now Macau is facing its strongest challenge ever, the outbreak of coronavirus, which has caused a huge hit in the gaming business. Casinos were shut down for an extended period due to the coronavirus. Visa restrictions have also added to the decline in gaming activity in Macau.
As a result, gross gaming revenue in Macau plunged 94.5% in August, compared with the same month last year. Gross gaming revenue in Macau declined 81.6% through the first eight months of 2020. The high sensitivity of casino stocks to all the developments related to China and their pronounced cyclicality means that investors should pick casino stocks carefully.Top Casino Stock #4: Wynn Resorts (WYNN)
Wynn Resorts owns and operates Wynn Macau and the Wynn Palace in Macau, as well as Wynn Las Vegas and Encore in Las Vegas. Since Wynn Resorts is highly leveraged to the gaming activity in Macau, it saw its earnings collapse and it cut its dividend by 62% in 2015-2016 due to the Macau downturn that was caused by the anti-corruption regulatory crackdown in the area. But as Macau strongly recovered in the last three years, Wynn Resorts returned to growth.
Unfortunately, the company is now facing the headwind of coronavirus in all the regions in which it operates. Wynn Resorts reported earnings results for the second quarter on 8/4/2020. Revenue declined 95% year-over-year to $85.7 million, which was $190 million less than expected. The company lost $6.14 per share in the quarter, missing estimates by $1.23. Adjusted property EBITDA was a loss of $322.9 million compared to estimates of a loss of $314 million. This compared unfavorably to adjusted EBITDA of $480.6 million in the second quarter of 2019.
Results for Wynn Resorts were once again severely impacted by the COVID-19 pandemic as properties in Macau were closed for 15 days. Las Vegas operations didn’t open until June 4th.Wynn Palace revenues declined 98.6% as a result. Revenues for Wynn Macau decreased 97.8% while Las Vegas decreased 86% year-over-year. Wynn Resorts suspended its dividend in an effort to conserve capital. Consensus estimates call for a loss of $11.52 per share for 2020.
On the bright side, casinos are gradually reopening, and Wynn Resorts seems to have ample room to grow in the upcoming years thanks to its promising growth pipeline.
Source: Investor Presentation
The company has made progress in the design of Crystal Pavilion in Macau, which will be a major tourist attraction. In addition, Encore Boston Harbor opened in June-2019 and has exhibited strong performance so far so it has promising growth prospects ahead thanks to expected ramp-up in activity.
Moreover, the company has been caught off guard, with total current and long-term debt outstanding of $12.78 billion and cash and cash equivalents of $3.80 billion. Therefore, the stock is carrying an increased amount of risk right now due to its high level of debt.
However, we believe that the coronavirus crisis will not last beyond this year and we view the long-term growth prospects of the company as intact. We expect 4% annual EPS growth through 2025. Using the company’s current assets, return on assets of 5.6% over the last decade and share count, we believe Wynn Resorts has earnings power of $1.89. We will use this figure to calculate fair value and projected return.
Based off of the earnings power estimate for 2020, the stock is currently trading at a P/E ratio of 44, which is higher than its historical average of 30.1. However, the stock traded at abnormally high P/E ratios in some years due to depressed earnings in those years.
For instance, the abnormally rich valuation of the stock during 2015-2017 resulted from the market’s view that the downturn in Macau was temporary. Our target P/E ratio of 18 reflects uncertainty regarding Macau and the coronavirus. If shares reverted to our target P/E by 2025, then valuation would be a 16% headwind to annual returns over this time period.
If the stock reaches our fair valuation level over the next five years, it would reduce shareholder returns by 16%, effectively wiping out earnings growth and dividends over that time period. The stock is markedly volatile due to its high debt load, which is an added risk factor.
As a result, only those who can stomach extreme stock price volatility and have confidence in the ability of Wynn Resorts to navigate through the current crisis should consider buying the stock.Top Casino Stock #3: MGM Resorts (MGM)
MGM Resorts owns and operates casinos, hotels and conference halls in the U.S. and China. The company has the least exposure to Macau in this group of stocks. As a result, it suffered much less than its peers from the trade war between the U.S. and China and the protests of people in Macau a few months ago.
However, the company is highly exposed to the outbreak of coronavirus, just like its peers. Due to the rapid spread of the coronavirus, MGM Resorts suspended all its casino operations in Las Vegas on March 16th and did not accept hotel reservations for the dates prior to May 1st. The company also closed its casino in Maryland.
In late July, MGM Resorts reported (7/30/20) financial results for the second quarter of fiscal 2020. The company began reopening its U.S.properties in the quarter but its revenue plunged -91% over last year’s quarter due to the suspension of the operations of the company in the U.S. and a collapse in gaming revenues in Macau caused by travel restrictions and social distancing.
Source: Investor Presentation
As a result, MGM Resorts switched from a profit of $0.23 per share in last ye
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*Online Gambling Stocks To Buy
*Online Gambling Stocks To Invest In
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DraftKings (DKNG, $53.19) has been a public company for less than half a year, but it already has made a mark on both sports betting stocks and special purpose acquisition companies (SPACs). After the Supreme Court ruling, one Bank of America/Merrill Lynch analyst upgraded the company from “neutral” to “buy” and raised its share price target. With record revenues of $2.38 billion in 2017, Boyd has the resources to move quickly into sports gaming once it becomes widely legal.Allstar Gambling USA / News / Top 5 Gambling Stocks 2020Allstar GamblingJanuary 18, 2020TwitterFacebookWhatsApp
The Supreme Court of the United States of America in a landmark judgment given in May 2018 declared that the Federal law that allowed gambling of legalized sports in the country no longer stands constitutional. It was held that the law is violative of the 10th amendment. It was now declared that gambling in sports could now only be sanctioned and approved by states and is not under the purview of the Federal Government. This only resulted in a predictable sports insurgency.
In October, New Jersey had over $250 million involved in betting and this was a significant increase in 41% on betting as compared to how it was just a month before. Many other states are following the same pattern as gambling in legal sports reaches a new high. These include The Garden State, New Mexico, Pennsylvania, Rhode Island, Delaware and Mississippi among others. It is predicted that by the year 2022, all around the world, sports fans will be having as much as $1 trillion invested in online betting per year.Five gambling stocks with great potential in 2020
Given below are five gambling stocks that one should keep an eye on in regard to gambling in legalized sports.1. MGM Resorts (NYSE:MGM)
Betting on a small scale in sports is considered unimportant and insignificant in Las Vegas, USA. This comes into picture when we compare blackjack gains of $1.24 billion to actual gains of $329.1 million as extracted from legal sports. However, the news is that the chief chain of casinos to prime timing. This major casino hand in the United States alone generated over $4 billion of revenue in the city of Vegas. However, it also has its working in the Atlantic City but it overtook a proportion of the Casino Empire in the city of New York. It now has a substantial mark in the betting arena of sports having a rank of $114 million which accounts to be 35% in the betting world. MGM holds a market grab of $13.5 billion. It is utilizing its monetary strength to turn around the sports world when it comes to betting. The casino major has introduced betting in sports in two casinos in the Mississippi and has finally emerged as the “authorized gaming counterpart” of the NBA.
MGM Resorts has finalized deals with the most significant and prime leagues of the country. These include basketball, hockey, and baseball at the professional level. The leagues permit MGM to cross-advertise the casinos belonging to the company and also promoting the app for sports betting. It is important that note that MGM has only been possible in regulating bets in states where the action was previously legal. Till now, the biggest reward lies with the National Football League. MGM presently has a great hold of success and plans of having Philadelphia Eagles and Pittsburgh Steelers involved in sports betting, following which each game will be a fair play.2. BRAGG (BRAG. V BKDCF)
The BRAGG Gaming Group was earlier known as Breaking Data Corporation. It has onlookers as large as 31 million virtue of its media asset, Give me Sport (GMS). It even has an internet connected playing the stage that is famous worldwide and is known by the name, Oryx gaming. Through Oryx Gaming aims to influence the GMS viewers into gaining power and emerging as the biggest betting of sports gaming customer record on the planet. The path of online gambling gives surprising levels of profit. Studies show that the gross rewards in the market through gambling in 2018 were $46.7 billion. It is predicted that the amount will go up to $89 by the year 2025.
The Facebook profile of GMS has as much as 26 million active user accounts. If this data is compared with ESPN, we see that even a significant sports brand as ESPN has only 19 million users on its Facebook page while its total worth amounts $28 million. If we talk about Sky Bet, the property was just sold off for %5.7 billion and only had 819,000 people as its audience. This has only led Oryx Gaming Services to introduce a GMS in order to have only one platform focusing on Sports Betting. Once the OGS is launched online it will incorporate the OGS technology with GMS to bring out an amazing experience to all the BRAG’s users.
Today, it is noticeable that BRAGG has two key possessions GMS and Oryx. The former has had an increased revenue earning of over 400%. The per month traffic online has also added by more than 5 million and additional revenue growth of 30%. It is believed that that BRAGG can grab eyes of its possible audience; it can bring to large monetary gains to the company. It can even come out as an important success story of this year.3. International Game Technology (NYSE:IGT)
After having an unsure revenue through the year where the company had a significant one-year increase of $31 to a decrease of $14 by November. It is only in December that the numbers found an equilibrium at $16. It has a market hold of $3.4 billion and 12,000 employees and is known to be a big company that produces a significant amount of casino playing equipment and machine for slots, more than any other company. But now the company is evolving and embracing betting in sports. Since IGT is a service provider it shall not have to worry about the risks of maintaining books of sports. It merely needs to complete the requirements of companies like MGM and infrastructural construction that help in encouraging sports.
In 2017, IGT was managing money worth $12 billion being used in sports betting. It is advisable for IGT to be safer so that safely all the bets are placed by potential investors in the year 2019. In July 2018, IGL claimed to have started a collaboration with the famous betting company FanDuel. As per the collaboration, IGT will be responsible for bringing FD’s ongoing betting mechanisms to markets in 15 states of the country. IGT will also launch PlayShot that will use FD’S consumer looking and waging technology and provide service to people who bet in sports. FD wishes to use the technology of the very famous IGT to establish a remarkable footing in the world of betting in sports. Hence, it is predicted that after an uneasy year, IGT’s hard work and luck will finally pay off in 2019.4. BOYD Gaming Corporation (NYSE:BYD)
The company is a significant and huge casino regulator in the United States and is the owner of 29 gaming possessions in 10 states. It is coming out to be a big character when it comes to sports gambling.
The previous decade, Boyd has shown unusual skills that have contributed positively to the company. It has dealt with a lot of sports books in the City of Sin. Since betting is considered legal it is planning to expand to different regions and their markets.
The firm has also come into collaboration with MGM as per which they will be equal partners in online and offline (mobile) gambling mechanisms. MGM is proposing its poker and playing applications for 15 states under sportsbook of Boyd’s. The deal is unexpected and can be the start of a huge gaming monopoly together owned by Boyd and MGM. B’Connect is Boyd’s new application for gaming and is used in 3 casinos. It has also signed a work project with FanDuel and offered to lend out its gaming characteristics for FD’s mobile and internet-abled gambling services. The contract allows for Boyd to have authority over all the states where it possesses licenses for gaming, other than Nevada.5. Marriot International (NASDAQ:MAR)
Marriot serves as the biggest hotel businesses in the world. The hotel brand has a lot of collaborations with casinos and is even partners with them. Presently, MGM and Boyd wish to collaborate with Marriot to use their customer turn out to their own advantage and attract extra business. Marriot is significant all over the country and has deals relating to license with JW Marriot Resort & Spa located in Las Vegas. Recently, after all the negative publicity the hotel chain is facing, the company gave a statement regarding the building of a casino and resort with 4000 rooms. The negative attraction due to scandalous reported a breach of data. But the company has been patient in moving forward and strategized well to come out and claim over the market all over again.
Another company expected to have increased growth since gaming starts again:Online Gambling Stocks To Buy6. Millenial eSports Corporation (OTCQB:MLLLF)
It is a small-scale firm located in Toronto with its main focus on E-Sports and E-Gaming. The company works on all- creation of content, data analysis, media and broadcasting, and, tools for execution. The firm introduced analytics and intelligence in business items for industry relating to e-gaming. It has even started working on the preferences on Aston Martin and McLaren, Motorola G and Formula E which are mainly based on mobile gaming arena.Join MYB Casino now! The NO-nonsense USA gambling site!Bonus:
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Updated on September 14th, 2020 by Bob Ciura
As the saying goes, the house always wins. Casinos operate strong business models, as casinos earn a virtually guaranteed profit from the sum of the bets they receive. The relatively attractive economics of casinos make the industry worthy of a closer look.
Investors may be particularly intrigued by the earnings growth and dividends of the major casino stocks. The 4 major publicly-traded casino stocks all pay dividends to shareholders, but they are far from the safest dividend stocks around.
If you are looking for a safer basket of dividend growth stocks, consider the Dividend Aristocrats. They are an elite group of 65 stocks in the S&P 500 Index with 25+ years of rising dividends.
You can download an Excel spreadsheet of all 65 Dividend Aristocrats (with important financial metrics such as dividend yields, P/E ratios, and dividend payout ratios) by clicking the link below:
Click here to download your Dividend Aristocrats Excel Spreadsheet List now.
Casinos are not without a fair amount of risk. Casinos are highly vulnerable to recessions, as consumers typically cut back heavily on gaming when the economy enters a downturn. The four major casino stocks saw their earnings collapse during the Great Recession. A similar impact has taken place to start 2020 due to the coronavirus crisis, which has battered the casino industry.
We have analyzed the major casino stocks in the Sure Analysis Research Database, which ranks stocks based upon the combination of their dividend yield, earnings-per-share growth potential and valuation to compute expected total returns. In this article, we will compare the expected 5-year total annual returns of the four major casino stocks.Table Of Contents
For this article, stocks are ranked in order of least attractive to most attractive. While 5-year expected returns are incorporated in the rankings, we have also utilized a qualitative screen based on balance sheet strength and overall business quality.
You can instantly jump to a particular section of the article using the links below:Casino Industry OverviewOnline Gambling Stocks To Invest In
The casino industry is in severe distress right now. The spreading coronavirus and resulting global recession have taken their toll on the casino stocks. The large U.S. casinos are heavily reliant on Macau, the largest gaming market in the world and the only market in China where casinos are legal. As a result, these stocks are very sensitive to any developments that affect the gaming activity in Macau.
This was a significant concern several years ago. In 2014, China initiated an anti-corruption regulatory crackdown, which greatly reduced the gaming activity in the area. Fortunately for the casinos, the downturn lasted for approximately two years and gaming activity in Macau recovered thereafter. Then the gaming activity in Macau faced another headwind, namely the trade war between the U.S. and China.
This headwind lasted for only about a year but now Macau is facing its strongest challenge ever, the outbreak of coronavirus, which has caused a huge hit in the gaming business. Casinos were shut down for an extended period due to the coronavirus. Visa restrictions have also added to the decline in gaming activity in Macau.
As a result, gross gaming revenue in Macau plunged 94.5% in August, compared with the same month last year. Gross gaming revenue in Macau declined 81.6% through the first eight months of 2020. The high sensitivity of casino stocks to all the developments related to China and their pronounced cyclicality means that investors should pick casino stocks carefully.Top Casino Stock #4: Wynn Resorts (WYNN)
Wynn Resorts owns and operates Wynn Macau and the Wynn Palace in Macau, as well as Wynn Las Vegas and Encore in Las Vegas. Since Wynn Resorts is highly leveraged to the gaming activity in Macau, it saw its earnings collapse and it cut its dividend by 62% in 2015-2016 due to the Macau downturn that was caused by the anti-corruption regulatory crackdown in the area. But as Macau strongly recovered in the last three years, Wynn Resorts returned to growth.
Unfortunately, the company is now facing the headwind of coronavirus in all the regions in which it operates. Wynn Resorts reported earnings results for the second quarter on 8/4/2020. Revenue declined 95% year-over-year to $85.7 million, which was $190 million less than expected. The company lost $6.14 per share in the quarter, missing estimates by $1.23. Adjusted property EBITDA was a loss of $322.9 million compared to estimates of a loss of $314 million. This compared unfavorably to adjusted EBITDA of $480.6 million in the second quarter of 2019.
Results for Wynn Resorts were once again severely impacted by the COVID-19 pandemic as properties in Macau were closed for 15 days. Las Vegas operations didn’t open until June 4th.Wynn Palace revenues declined 98.6% as a result. Revenues for Wynn Macau decreased 97.8% while Las Vegas decreased 86% year-over-year. Wynn Resorts suspended its dividend in an effort to conserve capital. Consensus estimates call for a loss of $11.52 per share for 2020.
On the bright side, casinos are gradually reopening, and Wynn Resorts seems to have ample room to grow in the upcoming years thanks to its promising growth pipeline.
Source: Investor Presentation
The company has made progress in the design of Crystal Pavilion in Macau, which will be a major tourist attraction. In addition, Encore Boston Harbor opened in June-2019 and has exhibited strong performance so far so it has promising growth prospects ahead thanks to expected ramp-up in activity.
Moreover, the company has been caught off guard, with total current and long-term debt outstanding of $12.78 billion and cash and cash equivalents of $3.80 billion. Therefore, the stock is carrying an increased amount of risk right now due to its high level of debt.
However, we believe that the coronavirus crisis will not last beyond this year and we view the long-term growth prospects of the company as intact. We expect 4% annual EPS growth through 2025. Using the company’s current assets, return on assets of 5.6% over the last decade and share count, we believe Wynn Resorts has earnings power of $1.89. We will use this figure to calculate fair value and projected return.
Based off of the earnings power estimate for 2020, the stock is currently trading at a P/E ratio of 44, which is higher than its historical average of 30.1. However, the stock traded at abnormally high P/E ratios in some years due to depressed earnings in those years.
For instance, the abnormally rich valuation of the stock during 2015-2017 resulted from the market’s view that the downturn in Macau was temporary. Our target P/E ratio of 18 reflects uncertainty regarding Macau and the coronavirus. If shares reverted to our target P/E by 2025, then valuation would be a 16% headwind to annual returns over this time period.
If the stock reaches our fair valuation level over the next five years, it would reduce shareholder returns by 16%, effectively wiping out earnings growth and dividends over that time period. The stock is markedly volatile due to its high debt load, which is an added risk factor.
As a result, only those who can stomach extreme stock price volatility and have confidence in the ability of Wynn Resorts to navigate through the current crisis should consider buying the stock.Top Casino Stock #3: MGM Resorts (MGM)
MGM Resorts owns and operates casinos, hotels and conference halls in the U.S. and China. The company has the least exposure to Macau in this group of stocks. As a result, it suffered much less than its peers from the trade war between the U.S. and China and the protests of people in Macau a few months ago.
However, the company is highly exposed to the outbreak of coronavirus, just like its peers. Due to the rapid spread of the coronavirus, MGM Resorts suspended all its casino operations in Las Vegas on March 16th and did not accept hotel reservations for the dates prior to May 1st. The company also closed its casino in Maryland.
In late July, MGM Resorts reported (7/30/20) financial results for the second quarter of fiscal 2020. The company began reopening its U.S.properties in the quarter but its revenue plunged -91% over last year’s quarter due to the suspension of the operations of the company in the U.S. and a collapse in gaming revenues in Macau caused by travel restrictions and social distancing.
Source: Investor Presentation
As a result, MGM Resorts switched from a profit of $0.23 per share in last ye
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