You’ve probably heard that Vegas wasn’t built on the backs of winners. The small spot in the desert has transformed from a tiny Nevada town into a monument to opulence.
So, why the transformation? Because the casino industry has been essentially printing their own money for decades. These huge megaresorts and casinos have transformed the Las Vegas skyline and pumped several billions of dollars into the economy annually.
Increased Volatility
Many investors are attracted to the top casino stocks based on their tremendous growth and sizable dividends. In fact, the top four casino stocks pay shareholders a dividend. Unfortunately, these are not the safest options on the table.
A degree of risk comes with the casinos. For instance, recessions may drastically impact the earnings for a casino. When the economy is down, consumers shy away from gaming as their disposable income dwindles.
The Current Casino Industry Climate
With that introductory material out of the way, here are the top four casino stocks you might invest in.
#4 Casino Stock: Wynn Resorts (WYNN)
Wynn Resorts has a stake in both Macau and Las Vegas. Roughly 3/4 of its cash flow comes from two Macau casinos, the Wynn Palace and Wynn Macau. The remainder is brought in by the Encore and Wynn Las Vegas.
Because Wynn Resorts relies so heavily on the Macau market, it is more susceptible to the ups and downs of the market there. Of course, Macau has always bounced back stronger than ever, and Wynn Resorts comes right back with it.
Through the first three months of 2020, the company’s cash flow had dropped by 43%, but this was better than predicted. Wynn Resorts made an announcement regarding the suspension of its dividend. The company hopes this move will conserve precious capital until the industry and the economy can bounce back.
Thankfully, the casinos have reopened, and while travel is still way down, people are starting to move more freely. Furthermore, Wynn Resorts seems to be set up for tremendous growth with a decent market share in both Macau and Las Vegas.
Additionally, Wynn opened the Encore Boston Harbor in June of last year. The casino in this burgeoning market has shown robust performance and has the potential to be the company’s fastest-growing prospect.
The casino industry has proven to be extremely volatile over the last decade. Yet, the juggernaut casinos always seem to bounce back. Wynn Resorts is probably only a good pick for those that can accept the wild swings. Wynn Resorts depend heavily on the market in China as well, and this can add increased pressure to the stock.
#3 Casino Stock: MGM Resorts (MGM)
MGM Resorts is another company in the top four casino stocks. Like Wynn, MGM operates resort casinos in both the United States and China. However, MGM creates an overwhelming majority of its cash flow domestically. Nearly 81% of MGM’s revenue comes from the United States market and the remaining from Macau, China.
This means MGM has felt a much softer blow from China’s civil unrest and past trade wars between the two countries. The MGM has considerably less exposure in Macau than the other three stocks on this list.
As you might have guessed, this hasn’t shielded the company in 2020. MGM was forced to abruptly suspend all Las Vegas operations in March and placed 63,000 employees on furlough. The company also closed the MGM National Harbor in Maryland.
Experts and industry insiders alike are predicting that as many as 7% or more of the furloughed employees could be unemployed by the end of August. Revenues have not immediately bounced back to 2019 figures. I imagine between the limited amount of people traveling and the financial burden that revenue will continue to be suppressed for months to come.
Looking towards the future, I anticipate MGM will make a strong comeback. Factors like the future of domestic sports betting and three recently completed resorts, including MGM Springfield, Park MGM, and MGM Cotai, leave the company poised to strike it big.
#2 Casino Stock: Melco Resorts (MLCO)
Melco Resorts is a large casino company that you may not be familiar with. They operate casino gaming and resort facilities exclusively in Asia. Melco draws roughly 90% of its revenue from Macau and the remaining 10% from the Philippines.
Melco Resorts does more business in Macau than any of the top casino companies. This has led to Melco being hit particularly hard by the downturn in Macau gaming. It also means that they’ll likely have a much better second half of the year.
Melco Resorts has been working on an expansion to its luxurious City of Dreams and is also working on opening a luxury resort in Yokohama, Japan. These efforts are sure to be a vital tool for growth.
Overall, Melco offers a robust portfolio with a proven track record of steady growth. The company should recover strongly and begin paying dividends relatively quickly.
#1 Casino Stock: Las Vegas Sands (LVS)
The final top casino stock on this list is Las Vegas Sands. A premier operator of resorts in Asia and the United States, LVS has faced increased strain due to the collapse of the casino industry in Macau and the US.
Las Vegas Sands isn’t unique in the devastating impact. Similarly, Las Vegas Sands isn’t unusual in the fact that it should likely bounce back and, in the future, continue to see strong growth.
Las Vegas Sands also appears to be the leading prospect to jump into the newly forming market of Japan. In fact, LVS has publicized plans to open resorts in Yokohama and Tokyo. This is sure to be a huge revenue generator for the company. However, this is still a few years away from becoming a reality.
Additionally, the company continues to grow with the expansion of its properties in Macau. The company is also expecting to see increased revenue when China’s light rail system connects Macau to the vast Chinese rail system.
Las Vegas Sands appears to be the strongest of the top casino stocks. It’s estimated that the company could easily survive an 18-month complete halt in activity. That is a huge indication of a healthy company. Imagine McDonald’s shutting down all operations for only 12 months and opening back up without missing a beat.
Conclusion
The casino industry has undoubtedly taken a hit over the last few months. But it looks like, even with the rough numbers early this year, these top casino stocks will continue to perform well in the future. There will undoubtedly be no shortage of anxious gamblers who will gladly hand over their cash.
Michael Stevens
Michael Stevens has been researching and writing topics involving the gambling industry for well over a decade now and is considered an expert on all things casino and sports betting. Michael has been writing for GamblingSites.org since early 2016. …
