In hindsight, last March may have been a once-in-a-lifetime opportunity to buy casino stocks. Why? Crashing due to the novel coronavirus, and the lockdowns that followed, gaming names large and small fell to near-distressed prices.
But with casinos opening much sooner than anticipated (albeit with social distancing), this sector proved resilient as 2020 played out. Coupled with iGaming (online casino) and sports wagering megatrends, investors had plenty of reason to bid stocks in the sector back up.
And then some. Not only are sector-wide ETFs (exchange-traded funds), like the VanEck Vectors Gaming ETF (NASDAQ:BJK) back above their pre-outbreak prices. Some individual names, like Penn National (NASDAQ:PENN) trade leaps and bounds above where they were when the pandemic first hit the U.S.
So, does that mean it’s too late to profit from casino stocks? Not exactly. Though admittedly, after their blockbuster rebound in the second half of last year, additional moves higher may not be as significant.
So, which casino stocks may be worth a look? Consider taking a gamble on these five major names:
- Bally’s Corporation (NYSE:BALY)
- Caesars Entertainment (NASDAQ:CZR)
- Golden Nugget Online Gaming (NASDAQ:GNOG)
- MGM Resorts (NYSE:MGM)
- Penn National Gaming (NASDAQ:PENN)
With the travel economy still waiting for mass vaccination to get “back to normal,” there’s some runway left for this still-challenged sector. Coupled with the growth opportunities in online gambling, and investors with a healthy risk appetite could still find opportunity in gaming stocks.
Casino Stocks To Buy: Bally’s Corporation (BALY)
It’s safe to say 2020 was a banner year for BALY stock. Formerly known as Twin River Worldwide, this operator of second-tier casino properties saw its stock crater with the rest of the sector during the March 2020 “coronavirus crash.”
But, as Seeking Alpha commentators wrote back in May, the company seized the opportunity, acquiring several properties at bottom-fisher’s prices. As part of its deal-making, the company got its hands on the Bally’s casino brand.
Yet this wasn’t what put Bally’s shares into hyperdrive. That was the company’s accelerated move into online sports wagering. Overnight, this turned the company into another vehicle to gain exposure to the online sportsbook megatrend.
As a result, BALY stock went parabolic last November, surging from around $30 per share, up to around $53 per share today. And, that was after recovering from as low as $7.65 per share, back up to $30 per share, from March to November! Tread carefully, as the company’s online wagering catalyst may be more than priced-in. But this rising star may be one to keep an eye on as more states legalize iGaming and online sportsbooks.
Caesars Entertainment (CZR)
As I wrote back in November, Caesars had it hands full when Covid-19 hit the United States. At the time, the company (then known as Eldorado Resorts) was in the process of closing its headline-making deal to acquire the former Caesars Entertainment.
But thanks to the sports wagering megatrend, investors cut the newly merged company some slack. And piled back into CZR stock. At today’s prices (just under $80 per share), both the online gambling and casino recovery catalysts look to be priced well into shares.
Yet, that doesn’t mean its hot run can’t continue. How so? As the bubble in online gaming stocks carries on, investors may continue to bid up operators like this one, as more states take action and legalize both iGaming and mobile sports wagering in their respective states. New York’s recent talk of legalizing online gambling has made headlines as of late. But other large states like California, Florida and Texas could also make major announcements in 2021.
Once its deal to acquire William Hill (OTCMKTS:WIHMY) closes, it’ll be the third-largest sportsbook operator in the U.S. With the opportunity to leapfrog MGM and Penn National (more below), there’s enough in motion to put more points into CZR stock.
Golden Nugget Online Gaming (GNOG)
Formerly known as Landcadia Holdings II, Golden Nugget Online Gaming has been covered extensively. Some of my InvestorPlace colleagues, like Mark Hake, are bullish on the stock, seeing it as reasonably priced relative to online gambling powerhouses like DraftKings (NASDAQ:DKNG).
On one hand, I like how this company is going after what could be a more profitable segment of the overall online gambling sector. Sports wagering may be the biggest opportunity when it comes to total revenue. But iGaming may wind up the true cash cow.
On the other hand, I’m concerned about its high debt position, as well as it rich valuation. Again, like with Caesars, Penn and all the rest, a premium valuation doesn’t preclude it from gaining further. Yet, may mean to be prepared for high volatility. Shares could briefly head lower (as they did back in October) before they continue to head higher.
MGM Resorts (MGM)
Like Caesars, MGM stock offers you both a play on the bricks-and-mortar casino recovery, as well as exposure to the online gambling megatrend. Far from sitting on its hands, this gaming powerhouse has made big moves to build up its online presence with the BetMGM platform.
Granted, given its bid to acquire U.K.-based Entain (owners of the Ladbrokes brand and MGM’s 50/50 partner in the BetMGM venture) was rejected, the company’s quest to become a leader in this space hasn’t gone as smoothly as it has for names like Caesars and Penn.
That being said, don’t expect the company to get left in the dust. Sure, as I said above, Caesars could soon be number three in the sports wagering space. And, early-movers like DraftKings and Flutter Entertainment’s (OTCMKTS:PDYPY) FanDuel remain the top dogs in this space.
But, with BetMGM already operating in nine U.S. states and many more expected to come online, this remains a solid play on the rise of internet gambling in the United States. Coupled with the potential recovery of its bricks-and-mortar operations this coming year, there’s plenty of room for MGM stock (trading for around $31 per share today) to head higher.
Penn National Gaming (PENN)
Up 333% in the past year and more than 24-fold from its coronavirus lows, Penn National stock had done the most “winning” among stocks in this very hot sector. Why? Namely, thanks to its smartly-timed acquisition of Barstool Sports just before the pandemic.
Not only did this deal give them a great brand and potential customer base for their budding sportsbook operations. The acquisition brought Barstool impresario Dave Portnoy into the fold as well.
With Portnoy shifting to day trading during last Spring’s lockdown-related sports hiatus, he became the stock’s main cheerleader. This helped to drive high retail investor interest in the stock. Much like popular names in the EV sectors, investors have willing to bid it up. With little concern about valuation.
As a result, PENN stock more than prices-in the potential for Barstool Sportsbook to dominate the market. Sure, its “crushed it” so far in its debut market, Pennsylvania. But only time will tell whether it’ll generate similar levels of success as it expands into Michigan and other major states. The risk of this “story stock” heading lower may exceed the opportunity for it to surge higher. In short, be careful.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.