Better Luck Ahead For Casino Operators, But Not All Stocks Trading Higher

Gaming stocks are a mixed bag these days, with recent S&P 500 addition Penn National Gaming NASDAQ: PENN in a correction, while another new S&P component Caesars Entertainment NASDAQ: CZR, is trading at new highs. 

Meanwhile, smaller companies from the gaming industry, such as Golden Entertainment NASDAQ: GDEN and Century Casinos NASDAQ: CNTY are also notching new price highs. 

Are these investments just a roll of the dice, or is there something besides luck driving the performance of individual stocks?

Let’s look at Penn National first. The company, which operates casinos, resorts, off-track wagering facilities, and gaming apps. In 2020, the company acquired a 36% interest in digital media company Barstool Sports. Together, the companies operate the betting app Barstool Sportsbook. 

On May 6, Penn reported first-quarter results. Earnings jumped a whopping 817% year-over-year, to $0.55 per share, topping views of $0.30 per share. Revenue was $1.27 billion, a gain of 14% from a year ago, ahead of expectations for $1.13 billion. 

The quarter marks a turnaround after several quarters in a row of either losses or declining earnings growth. The earnings slide began even before the pandemic. 

The road ahead looks good for Penn, as more states legalize sports betting, and analysts are predicting a post-pandemic travel and leisure boom, particularly domestically. 

Nonetheless, shares are down 7.99% this week, to $79.88. Because it’s now part of the S&P 500, it’s prudent to track the stock along with the broader index. As it’s now a component of funds tracking this index, it will often move in tandem with broader market direction, as three-fourths of stocks tend to do. 

The S&P 500 is down 2.44% so far this week, at the low end of its range. 


Caesars Holds Above Key Averages

Fellow S&P 500 component Caesars Entertainment is also slumping after its earnings report last week. The stock is down 5.50% this week, to $100. Unlike Penn, which skidded below its 200-day average, Caesar’s is holding 5.8% above its 50-day line. 

Revenue was $1.7 billion, just slightly below estimates, but still a year-over-year gain of 259%. The company lost $2.06 per share, wider than the loss of $1.69 per share that analysts forecast. 

Here again, there’s plenty of reason for optimism ahead, with people ready to resume leisure travel. In Caesar’s earnings call, CEO Tom Reeg said he expects the company to post $1 billion in quarterly earnings at some point this year, and he’s eyeing more than $4 billion in earnings next year. 

Caesar’s has outperformed its index this year, notching a return of 40.95%, vs. 11.51%. 

Smaller gaming companies are faring a bit better this week.

Gaming Stocks Rally To New Highs

Golden Entertainment, which operates gaming resorts and restaurants, and distributes gaming equipment to casinos, rallied to a new high of $44.28, Monday, tacking on another 3.27% after Friday’s 17% gap-up following its earnings report. 

The stock is trading 5% lower with the broader market pullback Tuesday, but has a long way to go before closing Friday’s gap. 

The company beat top- and bottom-line estimates, with revenue of $239.7 million, and income of $0.35 per share. Both were up from the year-ago quarter. 

Century Casinos, which owns casino resorts, race tracks and Century Sports, a family bowling and game center in Canada, also retreated along with the broader market Tuesday. The stock rallied to a new high of $14.14 on Monday, following its earnings report last week. 

The stock is at lofty heights, hovering 11.6% above its 10-day moving average. As of now, it’s too far extended beyond any reasonable buy point to consider an entry; investors would be better served waiting for the next moving-average pullback.