🔥 Now Is Not the Time to Buy Casino Stocks | The Motley Fool

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Penn National Stock Is a Risky Bet, But It's the Best Gambling Name Right There's no denying that it's risky to buy Penn stock right now; a lot.


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Among the major players, 's top-performing casino stocks were Caesars Entertainment and Eldorado Resorts, up.


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Resorts and Casinos companies own and operate land-based casinos, standalone hotel and resort facilities, combination resort/casino, and other gambling.


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Top Casino Stock #1.


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Wynn and MGM also operate properties in Macau. JPMorgan analyst Joseph Greff upgraded Sands to a buy with a $52 target price Thursday.


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Wynn and MGM also operate properties in Macau. JPMorgan analyst Joseph Greff upgraded Sands to a buy with a $52 target price Thursday.


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Resorts and Casinos companies own and operate land-based casinos, standalone hotel and resort facilities, combination resort/casino, and other gambling.


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Casino Industry Overview.


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After a two-year slowdown, the gaming activity in Macau enjoyed a strong recovery in {/INSERTKEYS}{/PARAGRAPH} This project will significantly increase the traffic to the casinos in Macau. As a result, gross gaming revenue in Macau plunged Gross gaming revenue in Macau has declined 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. Therefore, the stock is carrying an increased amount of risk right now due to its high level of debt. The dividend is almost fully covered by the earnings and the free cash flows and the company has the strongest balance sheet in its peer group. Based on this, the stock has a price-to-earnings ratio of If the stock reaches our fair valuation level over the next five years, it will see a 6. The company launched Four Seasons Tower Suites Macao last year and it expects to perform its grand opening this year while it also expects to launch the Londoner Macao within and expand Marina Bay Sands in Singapore. As a result, these stocks are very sensitive to any developments that affect the gaming activity in Macau. As soon as the coronavirus crisis comes to an end, MGM Resorts will benefit from these growth drivers. Melco Resorts owns and operates casino gaming and entertainment casino resort facilities in Asia. MGM Resorts owns and operates casinos, hotels and conference halls in the U. As a result, it suffered much less than its peers from the trade war between the U. The company is the favorite bidder in this contest, which is expected to be a significant growth driver, though it will take a few years until the company earns a license and builds its new properties in Japan. Adding it all up, we expect total annual returns near zero over the next five years. We believe Las Vegas Sands is the top casino stock right now, due to its high expected rate of return over the next five years, but also its strong balance sheet. The company also closed its casino in Maryland. On the other hand, due to its extreme leverage to gaming activity in Macau, the stock is highly vulnerable to any negative development related to coronavirus. On the other hand, income-oriented investors should remain cautious, as the company is highly vulnerable to economic downturns and is very sensitive to any casino-related policy change in China and the ongoing coronavirus crisis. In addition, due to the propagation of the virus in the U. 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. As Japan legalized casino gambling three years ago, Las Vegas Sands has announced that it intends to open integrated resorts in Tokyo and Yokohama. Casinos are highly vulnerable to recessions, as consumers typically cut back heavily on gaming when the economy enters a downturn. The collapse in profits resulting from the outbreak of coronavirus has caught the company off guard with a high debt load. This means it is likely that the company will easily navigate through the ongoing coronavirus crisis and will enjoy a strong recovery whenever the headwind disappears from the horizon. The company is expected to post a significant loss for We view the stock as fairly valued. Visa restrictions have also added to the decline in gaming activity in Macau. If you are looking for a safer basket of dividend growth stocks, consider the Dividend Aristocrats. 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. Casinos were shut down for an extended period due to the coronavirus. All these initiatives are likely to be significant growth drivers as soon as Macau returns to normal. In addition, MGM Resorts has no debt maturities until , which gives management confidence that the company can make it through the downturn relatively intact. Not only do we see potential for strong earnings growth along with a high dividend yield for this stock, Las Vegas Sands also earns the top ranking because of its strong balance sheet and healthy liquidity. Las Vegas Sands stock offers a very attractive 6. This was a significant concern several years ago. Finally, a contracting valuation multiple could be an additional headwind for shareholders. It will benefit from the ramp-up of activity in its Morpheus Resort, which opened in mid, and attract an increasing number of visitors in Cotai thanks to improvements in mass transportation. 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. Source: Investor Presentation. Las Vegas Sands is a leading developer and operator of integrated resorts in the U. Melco Resorts is also expanding its City of Dreams in Macau and is taking steps to open an integrated resort in Yokohama, Japan. The U. Therefore, shareholder returns will be fueled by earnings-per-share growth. A similar impact has taken place to start due to the coronavirus crisis, which caused nationwide lockdowns and has battered the casino industry. Wynn Palace revenues were down Revenues for Wynn Macau were lower by Las Vegas revenues decreased Wynn Resorts suspended its dividend in an effort to conserve capital. Casinos are not without a fair amount of risk. On the other hand, the situation regarding coronavirus has remarkably improved in China in the last few days and the worse seems to be behind for the country, though it is still too early to draw definitive conclusions. The company has made progress in the design of Crystal Pavilion in Macau, which will be a major tourist attraction. 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. Therefore, despite the promising growth prospects, we hold modest expectations for Melco, due to its extreme leverage to the activity in Macau. Fears of the spreading coronavirus and the possibility of a global recession have taken their toll on the casino stocks. Moreover, MGM Resorts still has a relatively large amount of debt, as its net debt exceeds the current market cap of the stock. As mentioned above, gross gaming revenue in Macau plunged in April. If the stock reaches our fair valuation level over the next five years, it would reduce shareholder returns by The stock is markedly volatile due to its high debt load, which is an added risk factor. However, the company is highly exposed to the outbreak of coronavirus, just like its peers. In addition, Encore Boston Harbor opened in June and has exhibited strong performance so far so it has promising growth prospects ahead thanks to expected ramp-up in activity. The relatively attractive economics of casinos make the industry worthy of a closer look. The company has by far the least exposure to Macau in this group of stocks. In , China initiated an anti-corruption regulatory crackdown, which greatly reduced the gaming activity in the area. The casino industry is in severe distress right now. Casinos operate strong business models, as casinos earn a virtually guaranteed profit from the sum of the bets they receive. The 4 major publicly-traded casino stocks all pay dividends to shareholders, but they are far from the safest dividend stocks around. Investors may be particularly intrigued by the earnings growth and dividends of the major casino stocks. {PARAGRAPH}{INSERTKEYS}As the saying goes, the house always wins. It is worth noting that the gaming activity in the area was facing another headwind, protests from civilians, before the outbreak of coronavirus. 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. On the other hand, beyond this year, Las Vegas Sands has promising growth prospects ahead. For this article, stocks are ranked in order of least attractive to most attractive. 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. 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. As soon as the effect of coronavirus begins to fade, the company has promising growth prospects ahead. Then the gaming activity in Macau faced another headwind, namely the trade war between the U. This debt load increases the risk of the stock and hence investors should be careful before buying the stock. Due to the headwind from coronavirus, we expect MGM Resorts to report a net loss in After the massive dividend reduction, returns from dividends will be negligible until the full dividend is restored. As Melco Resorts is the most leveraged to the gaming activity in Macau in this group of stocks, it is the most vulnerable company to the downturn in the area due to the outbreak of coronavirus. We will use this figure to calculate fair value and projected return. As a result, Las Vegas Sands will incur a significant hit to its earnings this year. In addition, Las Vegas Sands will benefit from the debut of the light rail system connecting Macau to the entire China rail network. As mentioned above, gaming activity has collapsed in Macau. Given its healthy balance sheet, the company is likely to resume paying dividends once the coronavirus crisis ends. The large U. Fortunately for the casinos, the downturn lasted for approximately two years and gaming activity in Macau recovered thereafter. Nevertheless, due to the headwind of coronavirus, along with a huge debt load, shareholders should not expect a material boost in dividends and share repurchases for the foreseeable future. Due to the outbreak of coronavirus, Las Vegas Sands is facing strong headwinds in Macau and in the U. In this article, we will compare the expected 5-year total annual returns of the four major casino stocks. If this improvement proves sustainable, Melco Resorts will greatly benefit in the back half of the year. Due to the rapid spread of the coronavirus, MGM Resorts suspended all its casino operations in Las Vegas on March 16th and does not accept hotel reservations for the dates prior to May 1st. Furthermore, Las Vegan Sands continues to pursue growth by expanding and upgrading its Macau properties. Overall, we expect 1. The four major casino stocks saw their earnings collapse during the Great Recession.