Gaming's smart money

August 21, 2015 01:00 PM

Casinos are a popular pastime in the United States and abroad. Having a casino in a hotel or resort represents a big draw for many guests. The Wynn and MGM Grand are two of the most well-known casino operators, but there are several more competitors in the field. Although many casino stocks have been affected recently by increased gambling regulations in Beijing, many analysts had the foresight to still make profitable calls. Below are the most profitable ratings made in the past 12 months on the top five casino stocks with a three-month horizon. 

Credit Suisse gaming analyst Joel Simkins maintained an outperform rating on casino and racetrack operator Penn National Gaming (PENN) on Oct. 24, 2014, following the company’s third quarter 2014 earnings results. The company beat Wall Street’s revenue expectations, which largely reflected better than projected property operating results. The stock was priced at $12.41 when Simkins made his rating and it jumped up to $15.23 three months later, marking a 23.4% profit on his recommendation. 

On March 31, 2015, Bryan Maher of Brean Capital initiated coverage on Century Casinos (CNTY) with a “Buy” rating and a price target of $8.50. Century Casinos is an international casino entertainment company that owns and/or operates eight casinos in Colorado, Canada and on cruise lines. The company also owns two-thirds of Casinos Poland Ltd., which owns and operates nine hotel casinos in Poland. The analyst admired the company’s strategy of “taking initial minority positions in projects/casinos that they believe have above-average earnings growth potential and then increasing those ownership positions over time to become the majority/controlling partner.”

At the time of Maher’s rating, CNTY closed at $5.45 per share. Three months later on June 30, CNTY shares were $6.30. Investors who listened to Bryan Maher’s rating would have made a 15.5% return on their investment.

Harry C. Curtis of Nomura Securities maintained a Buy rating on MGM Resorts International (MGM) with a price target of $24 on Jan. 21, 2015. MGM Resorts owns and operates casinos and hotels throughout the United States and in Macau, China. Despite his bullish rating, Curtis said casinos in Macau would be threatened by Beijing, which “is tightening and enforcing travel and capital flow regulations that either didn’t exist or were ignored nine months ago.” MGM stock was priced at $19.24 per share at the time of Curtis’ rating and increased to $21.71 in the following three months. Investors who listened to the Curtis’s rating would have made a 12.8% profit on his investment. 

Karen Tang of Deutsche Bank downgraded Wynn Resorts Ltd. (WYNN) from Hold to Sell on Aug. 22, 2014 when shares were trading at $200. Wynn owns hotels and casinos in Las Vegas and Macau, China. The analyst noted several negative trends in Macau such as slowing demand, increased competition, increasing labor costs and a prolonged approval process for new facilities. Additionally, Tang noted a newly implemented smoking ban in casinos in Macau. Three months later on Nov. 22, 2014, Wynn shares had fallen to $180. Investors who had followed Tang’s Sell rating would have made an 8.9% return on the call during three months.

On Jan. 15, 2015, Stifel Nicolaus analyst Steven Wieczynski reiterated a Buy rating on Las Vegas Sands Corp. (LVS) with a price target of $75. Las Vegas Sands owns and operates several hotels in the United States and Asia. The analyst was bullish on the stock despite a 3% decline in Macau’s gross gaming revenue in 2014. He reasoned his rating, noting, “We’re not predicting a v-shaped recovery, but the longer-term upside opportunity far outweighs incremental downside potential.” Las Vegas Sands was $54.84 per share when Wieczynski recommended the stock and jumped to $56.77 in the following three months. Those who listened to Wieczynski’s recommendation would have made a 4.7% profit on the call.

About the Author

Uri Gruenbaum is the CEO and co-founder of TipRanks, whose proprietary technology is based on natural language processing & machine learning algorithms that constantly track, rank & measure financial experts based on their stock ratings, bringing accountability into the markets. @TipRanks