In May 2018 the Supreme Court overturned PASPA, which gave each state the right to legalize sports betting. Today 18 states have legalized sports betting, and it’s currently operational in 13 of them. In this note we examine the initial impact, project the incremental near-term impact with the start of the NFL season, and project the long-term opportunity for the industry.
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The U.S. ISM manufacturing PMI has been in a downtrend for the last year, and this week it fell below the key 50 level for the first time since August 2016. In this week’s piece we examine the implications for our coverage by looking at industry stock returns over the last 25 years in relation to when PMI drops below 50 as well as when PMI eventually bottoms.
July Vegas Strip GGR reported this morning (08/28/19) showed an increase of 1.6% y/y versus our guess of up mid-to-high-single digits y/y growth, but the data is volatile month to month, like last month when June was significantly better than expected. Normalizing for slightly better hold the result was roughly flattish y/y. We will refrain from judging the month until the RevPAR data is released later today at around 2 PM ET. We are looking for Strip RevPAR growth of about mid-single digits y/y. We feel good about 3Q CZR and MGM estimates, as we heard from both companies at 2Q reports when July should have been mostly known.
Las Vegas Strip revenue and EBITDA expectations still seem modest, and expectations seem particularly low for 2020, even though this earnings season seemed to indicate solid trends with both CZR and MGM beating consensus Vegas estimates and speaking positively on demand. We have a positive outlook for the Las Vegas Strip from now through year end 2020 due to a favorable event calendar, still limited rooms growth, easy comparisons, and we think expectations that seem low. We’ll discuss with charts. Please click the link above for the full report.
After the market closed (8/5/19) CZR reported adjusted EBITDAR of $631M ($633M hold adjusted) versus our $617M, and Consensus Metrix average of $623M or $619M excluding an outlier.
June Vegas Strip GGR was released this morning which showed a surprising increase of +17.7% y/y versus our expectation of -2.0% y/y driven by very high hold. Had the month played in line with normal hold then the result would still have been up around 5% y/y, ahead of our expectations. June Vegas Strip RevPAR was then released this afternoon which showed an increase of 4.8% y/y, which was below our expectation of around 10%. Overall, it was a good month for the Strip, and it appears 2H is shaping up well per MGM, and we believe 2020 is setting up to be a strong year, too, with many tailwinds.
Vegas Strip fundamentals have been mixed YTD, though we still think better than the sentiment. We see potential for revenue reacceleration in 2020 due to several tailwinds, which we’ll discuss and quantify, and we’ll also discuss some potential risks.
For our Weekly Sho we've recorded a 20-minute video with 36 slides highlighting our current views as we head into another earnings season. The cruise line section begins at 4:03, the lodging section begins at 9:00, and the gaming section begins at 15:40. Enjoy the rest of your weekend!
May Vegas Strip GGR was released this morning which showed a decline of -11% y/y – entirely driven by continued weak baccarat play – below our expectation of -5% y/y. Had the month played in line with normal hold the result would have been in line with our expectation. Strip RevPAR was released this afternoon which showed an increase of 7.3% y/y, above our expectation of flattish. For the entire 2Q we estimate CZR Vegas revenue to be flat y/y and MGM Vegas revenue to be down slightly y/y. MGM Vegas and total consensus EBITDA for 2Q still seems too high to us, and CZR Vegas and total consensus EBITDAR for 2Q generally seems OK to us.
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