Seven publicly traded gaming companies didn’t hit 52-week lows on Monday.
That was the good news.
At least 17 other equipment suppliers, casino operators, and casino-centric real estate investment trusts saw share prices dip to levels not seen in several years.
For the publicly traded gaming sector, double-digit stock price declines were the norm Monday, as each of the three major stock indicators declined more than 7%. The Dow alone fell more than 2,000 points – a one-day record and the largest single-session percentage decline since 2008.
The investment community continues to fret over the economy in face of the U.S.’s spreading coronavirus outbreak.
Before the market opened Monday, Deutsche Bank released a research report that said COVID-19 concerns have put the tour and travel industries under tremendous pressure.
“To say it’s been a volatile move in the gaming and lodging sectors of late would be a considerable understatement,” Deutsche Bank gaming analyst Carlo Santarelli said in the report.
Gaming equipment suppliers – International Game Technology, Scientific Games, AGS, and Everi Holdings – have seen their market capitalization collectively decline 45.4% over the year-to-date.
Regional casino operators – Boyd Gaming, Penn National, Eldorado Resorts, Caesars, Twin River Worldwide Holdings, Red Rock Resorts, and others – are down 29.5% collectively.
Meanwhile, large capitalization companies with locations on both the Las Vegas Strip and in Macau – Las Vegas Sands, MGM Resorts International, Wynn Resorts – are down a combined 25%.
As for gaming REITs – Gaming and Leisure Properties, VICI Properties and MGM Growth Properties – the market capitalization decline has, thus far, been a relatively manageable 5.3%.
“We would note that this is the only group within our coverage universe that is currently outperforming the broader market,” Santarelli said.
Monday only exacerbated the situation.
Penn National, Caesars, Full House Resorts, Churchill Downs, Galaxy Gaming, VICI, and GLPI were the only gaming companies to avoid hitting 52-week lows. But Monday still brought double-digit drops for five of the companies, including Full House (down 18.14%) and Penn National (down 14.55%).
Las Vegas Sands, Wynn Resorts and MGM Resorts – the gaming industry’s largest casino operators in terms of revenue – all hit 52-week lows during the day. MGM was down 11.66% to close at $17.88, Las Vegas Sands dipped 9.48% to close at $49.66 and Wynn was off 12.87%, down $81.93.
Santarelli said gaming equipment suppliers “have been the most challenged.”
On Monday, IGT’s stock price dropped 33.34%, closing at $5.59 on the New York Stock Exchange. Scientific Games was down 22.5%, Everi was off 11.44%, and AGS fell 9.18%.
Santarelli said several factors are weighing down gaming equipment manufacturers, including high leverage; exposure to Italy, which has the second-highest number of confirmed coronavirus cases behind China; potential supply chain disruptions; and a challenging slot equipment outlook for 2020.
The other surprise declines are coming from the regional operators.
“From a fundamental perspective, we believe the regional operators are more insulated than their peers from the COVID-19 concerns,” Santarelli said.
Reno-based Eldorado Resorts fell 21.43%, or $7.21, to close at $26.44 on the Nasdaq. Meanwhile, Caesars was down $1.05, or 9.47%, to close at $10.04.
Two weeks ago, Eldorado CEO Tom Reeg said stock price issues wouldn’t derail the planned $17.3 billion merger between the two companies, expected to be completed sometime in the first half of the year.
Roth Capital Gaming Analyst David Bain told investors Eldorado has “obtained fully committed financing” for the acquisition, which would remove investor concern. Bain said Eldorado has been oversold, even before Monday’s massive decline.
#exclusive – Gaming stocks fall to 52-week lows during historic market decline. –@howardstutz, CDC Gaming Reports. https://t.co/gQWCRJkwkX #CDCgaming #coronavirus
— CDC Gaming Reports (@CDCNewswire) March 10, 2020
“While indicators demonstrate some lost convention and leisure business, overall first half 2020 trends to-date for Eldorado and Caesars have been solid, according to checks,” Bain said in a research note.
He still views Eldorado’s stock valuation at $75 per share.
Other regional casino operator declines included Red Rock Resorts, down 20.51% to close at $12.48. Boyd Gaming was off 9.67% to close at $20.17; Monarch Resorts, down 15.42% to close at $32.53; Churchill Downs, off 10.97% to close at $104.92, and Golden Entertainment, down 14.59% to close at $10.48.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
