Are losing casino stocks PENN, LVS and WYNN good bets for ‘22?

Posted: 28 December 2021 5:46 pm
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They were 3 of the S&P 500’s biggest losers for 2021. Here are 2 reasons to buy them for 2022 — and 2 reasons to skip them.

Shares of casino stocks Penn National Gaming, Las Vegas Sands and Wynn Resorts ranked among the 10 worst performers of the S&P 500 in 2021, as the industry — and tourism in general — continue to battle COVID-19 and the unknowns of the latest variant, Omicron.
As of this writing, Penn (PENN) is down 36% this year. Las Vegas Sands (LVS) and Wynn (WYNN) resorts are down 34% and 18%, respectively.
This suggests a buying opportunity if you’re convinced they’ll bounce back when the pandemic eases. But are they too much of a gamble right now?
Let’s look at the pros and cons of buying these three stocks.

Pros

Here are a couple of reasons these casino stocks might be a buy:

  • Gambling revenue is setting records. US gambling revenue hit $13.6 billion in the second quarter of 2021, a new industry record according to recent American Gaming Association data . This broke the previous quarterly revenue record from the same quarter in 2019 by 22.5%.In all, 2021 is on track to become the highest-grossing year in gaming industry history. If consumer spending continues to rise, 2022 might be another record-setting year for the casino industry.
  • Analysts have higher target prices on each of these three stocks. Analysts see Penn National Gaming hitting $83.59 over the next 12 months, a 62% premium over its current price of $51.60. They expect Wynn Resorts to reach $105.77, up 19%, and Las Vegas Sands to reach $49.13 per share, up 27%.

Cons

Consider these drawbacks:

  • Competition is fierce. And not only in Las Vegas, either. Several states have opened their doors for companies to establish brick-and-mortar sportsbooks and online sports betting ever since the Supreme Court legalized sports wagering.Shares of Caesars Entertainment (CZN), another gaming company that actually has done well this year and a major player in sports betting, are up 32% for the year. There may be more than an industry issue hurting those suffering stocks.
  • China’s crackdown on casino operators in Macau. China unveiled plans in 2019 to transform Macau’s reputation from a gambling mecca to a global leisure and tourism hub. Wynn Resorts and Las Vegas Sands each own properties there. Last month, a handful of people were arrested in Macau for illegal gambling and regulators aim to more closely supervise casinos’ operations.

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