As we approach the midpoint of the year, it’s crucial for investors to reassess their portfolios and identify potential risk factors. The gambling industry was once seen as a thriving sector with promising growth prospects. But recently, it faced numerous challenges that have led to the emergence of several gambling stocks to sell.

Let’s delve into three gambling stocks that investors should consider selling in May while they still can. These companies have been overhyped and overvalued. So, their future prospects appear bleak. By examining the underlying factors that have led to their decline, we aim to provide investors with valuable insights.

Therefore, examine three gambling stocks which represent a high-risk, low-reward scenario that is fundamentally unattractive for investors.

MGM Resorts International (MGM)

MGM Resorts International (NYSE:MGM) operates numerous casinos and resorts. But it has struggled with inconsistent earnings and high debt levels. The stock’s high valuation relative to earnings makes it vulnerable to market corrections.

The company holds $2.72 billion in cash against $31.50 billion in debt, resulting in a net debt position of $28.78 billion or -$91.74 per share.

Despite a record first quarter in 2024, with consolidated net revenues of $4.4 billion, the company continues to grapple with financial instability. Net income for 2023 was $1.1 billion, down from $1.5 billion in 2022. Adjusted EPS for 2023 was $2.67, compared to an adjusted EPS loss of $2.73 in 2022.

With such a large amount of debt relative to its earnings, it appears vulnerable. And, its P/E of 15 times earnings means it could be seen as expensive relative to its long-term potential and historical growth rates.

Las Vegas Sands (LVS)

Las Vegas Sands (NYSE:LVS), focused on Macao and Singapore, has seen its stock fluctuate due to regulatory uncertainties in China and competition in Asia. The company’s heavy reliance on these regions makes it susceptible to geopolitical and economic shifts.

In Q1 of 2024, LVS reported a 40% increase in revenue to $2.96 billion and a net income of $494 million, up 236% from Q1 of 2023.

Despite beating earnings expectations with an EPS of $0.75, exceeding the consensus estimate of $0.62, LVS faces ongoing challenges. The stock has decreased by 8.8% since January 2024. Thus, analysts predict cautious growth.

LVS could be one of those gambling stocks to sell primarily due to an unfavorable outlook and an overly optimistic EPS forecast for 2024. Some analysts predict that its EPS will surge over 70% to 2.74. If these high standards are not reached, it could be ripe for a correction.

International Game Technology (IGT)

International Game Technology (NYSE:IGT) specializes in gaming machines and lottery services. It has seen fluctuating performance due to changes in consumer behavior and technological advancements.

Additionally, IGT has had to deal with legal disputes, such as the recent resolution of litigation with Acres 4.0. Although resolved, it indicates tensions and potential financial drains from such disputes​.

Additionally, IGT experiences fluctuations in its financial performance. For example, the company reported Q1 of 2024 revenue of $1.07 billion. This was only a marginal increase from the previous year. So, this growth is modest given the broader market expectations, underlining its underperformance.

Also, nine analysts have given IGT hefty EPS forecasts to meet, while its top-line is not expected to grow much in the coming years. Its lack of top-line expansion could be what limits the stock’s potential in the long run.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.