The hospitality and entertainment sector has weathered immense challenges recently, from the global pandemic to inflation and uncertainties around interest rates. These external shocks put immense pressure on the industry, plunging valuations for major casino and resort companies. As the outlook brightens, select firms within the sector look poised for expansion and growth. It might be a good time to look for casino stocks to buy. According to an analysis, the sector seems to have reached a point that signals brighter prospects ahead — much to the benefit of those who can buy stock at a discounted price.
Analysts hold an optimistic outlook regarding the sector’s future trajectory, rating multiple casino stocks as a Buy or Strong Buy, with considerable upside potential. Given these projections, we identified three particular casino stocks that appear positioned to yield returns as the industry continues its recovery.
MGM Resorts International (MGM)
The first casino stock on our list is one of the leading hospitality and entertainment companies in Las Vegas, MGM Resorts International (NYSE:MGM). Formerly known as MGM Mirage, MGM Resorts owns casino, hotel and entertainment resorts across the United States and Macau. The company breaks up operations into three segments: Las Vegas Strip Resorts, Regional Operations and MGM China. These segments provide amenities like gaming, lodging, dining, retail and conventions.
MGM Resorts recently announced a transformation plan for Empire City Casino. By turning Empire City into a world-class entertainment destination, the company aims to attract a broader audience, bring in more revenue and solidify its position in the gaming and entertainment industry.
MGM Resorts reported solid third-quarter results, with $4 billion in consolidated net revenue, up 16% year-over-year (YoY). Operating income totaled $370 million, compared to a $1 billion operating loss in the same quarter last year. Net income increased to $161 million, a turnaround from the net loss YoY. EPS ended at $0.64, exceeding estimates by 16.36%. Analysts rate MGM a Strong Buy with around 55% upside potential, given the improved financial performance.
Caesars Entertainment (CZR)
The next casino stock on our list was founded in 1937 and headquartered in Reno, Nevada — Caesars Entertainment (NASDAQ:CZR). The company operates as a hospitality and gaming company in 13 states and 5 countries. It owns properties with slot machines, video lottery terminals, hotel rooms and table games. Caesars also conducts sports wagering in 28 jurisdictions through mobile and online platforms. Aside from that, the company runs dining venues, bars, lounges, hotels and entertainment venues. Today, Caesars Entertainment is valued at over $21 billion and continues to provide staffing and management services for its operations.
Caesars Entertainment earned a perfect Human Rights Campaign Foundation score for 16 consecutive years. This achievement enhances the company’s reputation and promotes a positive workplace culture, increasing employee morale, productivity and overall performance.
The company reported an excellent third quarter. Its GAAP net revenues increased to $3 billion, up from $2.9 billion last year. Its net income rose to $74 million, compared to $52 million YoY. Caesar Entertainment’s adjusted EBITDA grew to $1.04 billion from $1.01 billion, indicating its underlying business remains stable. Analysts rate CZR as a Strong Buy with a $78 price target, forecasting around 73% upside potential from its current levels.
Las Vegas Sands (LVS)
The last casino stock on our list is Las Vegas Sands (NYSE:LVS). The company was founded in 1989 and headquartered in Las Vegas. Today, it is a leading developer of casino destinations known as integrated resorts. Las Vegas Sands owns properties with a combined value of over $46 billion. Its flagship locations include Marina Bay Sands in Singapore (which is absolutely stunning) and a collection of other resorts. Five-star accommodations, fine dining, modern casinos, theaters and even spaces combine to deliver a premier travel experience under one roof.
Las Vegas Sands was recently recognized by Newsweek as one of America’s Most Responsible Companies for 2024, receiving a high ranking among integrated resort companies. This recognition highlights the company’s commitment to corporate responsibility and may appeal to socially conscious investors and customers.
Las Vegas Sands reported strong growth in its third quarter, with net revenue increasing to $2.80 billion compared with $1.01 billion last year. Net income was $449 million, rebounding from a $381 million net loss last year. Adjusted property EBITDA also rebounded to $1.12 billion from $191 million. The company also authorized a $2 billion stock repurchase program. However, interest expense rose to $200 million from $183 million last year. That said, Las Vegas Sands has a strong balance sheet with $5.57 billion of unrestricted cash. On top of that, analysts rate the stock a Strong Buy with a high price target of $77, reflecting a potential upside of around 53%. That makes an excellent case for why investors may want to pick up this casino stock.
On the date of publication, Rick Orford did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
