In this week’s piece we discuss a few topics with several charts, including: 1) incremental thoughts on WYND’s disappointing pre-report, but why we think there are five key reasons to be more encouraged after further analysis; 2) recent U.S. leisure travel and casino trends, where prior improvement has seemingly stalled some based on data we track; and 3) we look at what the data suggests for the prospects of another casino shutdown in Nevada/Vegas, which we do not expect. Please click here to view the full report.
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This is a piece we publish each quarter where we discuss key themes and refresh our thesis with about 70 slides. Specifically, we show the results of our recent investor survey; we discuss where we see the best opportunities; we look at the election impact to our group; we look at retail money flows into our stocks; and we update estimates and preview the upcoming quarter, and more.
In this week's piece we highlight work from Wolfe's Technical Analyst Team. Our technical team provided us with their technical outlook for the stocks under our gaming/lodging coverage, and we show their views and how it compares to our fundamental views. Please click here to view the full report.
Lodging stocks had a better week last week along with the market, but our lodging coverage is still down an average of 20% since the June 8th mini-peak versus the S&P 500 down 3%, as the “reopening trade” has stalled following rising COVID-19 cases. Timeshare stocks have been performing with broad lodging, and in this week’s piece we discuss several thoughts with charts highlighting why we think there should be more differentiation between timeshare and hotel stocks.
Our group has ripped off the bottom, along with the market, and now our target prices are near or below current prices, so we must reevaluate. Our options are to raise estimates, raise target multiples, downgrade the stocks, or roll our YE20 targets forward to YE21 targets. We choose to roll forward to YE21 targets, which we think makes the most sense because we can now value on 2022 estimates, which seem more normalized. We also downgrade MGM, where valuation no longer seems compelling to us.
Election day is now less than five months away, and we expect this topic to increasingly become a focus in the coming months. Former Vice President Joe Biden has proposed raising the U.S. corporate tax rate from 21% to 28%, while also increasing minimum tax rates on foreign based income. Last week our Accounting & Tax Policy team published a report discussing the potential impact. In this week’s piece we discuss the impact of the election to our coverage, and we specifically examine what higher taxes could mean to our group.
Raising our YE20 ERI target price from $26 to $44. ERI’s stock is up 58% since reporting earnings and has blown through our prior target as reports on the reopening process have been positive and as sports/iCasino gains momentum. We like the long-term story and still see significant upside potential over time. Our new target now assumes a meaningful contribution from sports and iCasino in our SOTP calculation. See Exhibit 2.
Each year we scour through annual proxy statements to learn about changes in corporate governance and shareholder alignment, and we publish the results. Specifically, we study three broad categories: 1) CEO compensation, including how much and how it’s derived, 2) CEO equity ownership, and 3) board composition.
Earnings season is now largely over, and we come away with 15 developing themes. We discuss with charts for each theme. Please click here to view the full report.
The current crisis has been much worse for gaming and lodging companies/stocks in comparison to 9/11, but we also think 9/11 offers some potentially interesting parallels worth considering, specifically regarding stock performance, travel trends, and the ultimate recovery. We’ll discuss.
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