Las Vegas Strip Sentiment in the Doldrums, Says Analyst

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Las Vegas Strip Sentiment in the Doldrums, Says Analyst

Ahead of Q2 earnings reports, Q3 already shaping up to be disappointing.

Las Vegas Strip casino revenue Nevada

Analyst says RevPar, July rate checks trending downward

Caesars and MGM: Long-Term Lease Obligations

Broadly speaking, casino stocks have performed admirably this year, notching impressive rallies off the post-Liberation Day lows.

However, investors in search of big gains with the group may need to exercise patience while waiting for a more sanguine macroeconomic environment to emerge next year and in 2027.

Both Caesars and MGM have long-term lease obligations across the Strip, levering the operators to interest rates.

However, the Federal Reserve is proving reluctant regarding rate cuts, indicating that catalyst could be off the table for Las Vegas Strip casino stocks over the near term.

Digital Gaming: A Bright Spot

While the Las Vegas Strip is contending with a challenging economic environment, iGaming and online sports wagering remain bright spots for the industry.

From the investment perspective, that theme is better accessed via operators such as DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT).

Likewise, market participants can defray some of the risk associated with a potential retrenchment in discretionary spending by evaluating shares of data providers Genius Sports (NYSE: GENI) and Sportradar (NASDAQ: SRAD).

Anticipated Earnings Results

Analyst Steven Pizzella forecasts downbeat earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) results for the current quarter.

The analyst notes that investor sentiment regarding Las Vegas Strip operators remains depressed — the result of tepid visitation and disappointing rev per available room (RevPAR) data.

Las Vegas Strip Sentiment Remains Low

Sentiment for the Las Vegas strip remains low, driven by:

  1. Year-to-date non-convention visitation, a proxy for leisure, down 8.3% Y/Y (May -9.0% Y/Y)
  2. LV Strip RevPAR down 4.8% Y/Y in May
  3. STR Las Vegas June RevPAR down 19.2% Y/Y
  4. STR weekly Las Vegas RevPAR down ~20% on average, the first two weeks of July
  5. Forward room rate checks that are uninspiring

Average daily rates (ADRs) on the Strip could experience compression in the “mid- to high-single-digit range” over the summer months because leisure spending factors more prominently into the equation during that time.

Conclusion

In conclusion, Las Vegas Strip casino stocks are facing a challenging economic environment. While iGaming and online sports wagering remain bright spots for the industry, investors may need to exercise patience while waiting for a more sanguine macroeconomic environment to emerge next year and in 2027.

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