No, we don’t mean the Reddit/GameStop scandal, which has everyone from Sen. Ted Cruz (R) to Rep. Alexandria Ocasio-Cortez (D) up in arms. Instead, we’re looking at a downgrade of revenue estimates for a slew of projections by JP Morgan analyst Joseph Greff, who adds that “[We] prefer to buy on pullbacks, generally.” So it’s not exactly bad news. Noting a rise in Covid-19 infections and corresponding “impact of casino restrictions on regional gaming visitation and spend,” Greff trimmed his estimates and rethought his price target for a who’s-who of regional gaming: Churchill Downs, Boyd Gaming, Caesars Entertainment, Golden Entertainment, Penn National Gaming, Station Casinos and Scientific Gaming. While lowering his forecast for 1Q21, Greff said 2Q21 would be “modestly better.” This doesn’t jib with the optimistic picture painted yesterday by American Gaming Association President Bill Miller, whose advocacy body does its own revenue tracking.
Greff elaborated that “vaccination hopes (which we share theoretically) allow for a more pronounced and sustainable consumer spend recovery starting in the 3Q21; we also know what marketing and staffing changes have been made—some of which are permanent—and have conviction that forward-year margins should be decently higher than pre-COVID-19 levels.” He added that gaming had been bolstered through a soft brick-and-mortar period by gains in sports betting and Internet play. He stuck with his price target for Station ($31/share) and added two bucks to his Boyd goal (to $54). The reasons have been well-rehearsed in this space, so we’ll skip them for now. He really likes Caesars, upping his target $6 to $89/share, noting that its William Hill purchase and i-gaming strategy are firming up nicely. “Additionally, CZR is attractively positioned for the return of the 55+ customer base to its casinos (we think this gains momentum along with vaccine distribution). During this period of COVID-19 related lockdowns/limited discretionary spend, many 55+ Caesars Rewards members have benefitted from increased savings and record-high home values and stock prices.”
The Morgan number-cruncher saw Penn’s $95/share and raised it to $118 (on the strength of Barstool Sports and the Internet) but stood pat on Churchill Downs ($200/share), citing a two-month closure of cash cow Rivers Casino Des Plaines and as-yet-undisclosed Kentucky Derby plans. Golden got a one-dollar boost, to $21, predicting “modestly higher” Nevada casino revenues, while Scientific Games remained static at $34, due to “the impact of casino closures/restrictions on SGMS gaming ops business.”
Speaking of Bill Miller, yesterday’s presser got immediate pushback from Americans for Nonsmokers’ Rights. Promising to support the AGA if it lobbied its membership to ban smoking, ANR wrote, “While more than 1,000 Tribal and commercial gaming properties have already gone smokefree, too many casinos still put their workers in harm’s way by permitting guests to remove masks inside to smoke. This defies common sense, let alone public health guidelines.” ANR added “indoor smoking is only holding back gaming from becoming a truly modern industry.” Ouch. The association also went over Miller’s head, as it were, sending a letter to President Biden that argued that working in a casino is in contravention to Biden’s vow that “No one should have to choose between their livelihoods and their own health.” It also noted that Nevada casino employees must remain masked, while players can unmask to smoke, vape and spew particulate matter into the air. “No credible public health official would approve of allowing the removal of masks to smoke, but it’s still standard operating procedure in too many casinos, despite the pandemic.”
ANR did not fail to observe that Big Gaming is seeking tax credits for deep cleaning and other anti-Covid measures it has undertaken. “While we are pleased casinos have adopted these protocols to help prevent the spread of the coronavirus, we are concerned that, unlike a significant number of Tribal casinos, too many commercial casinos are failing to take a commonsense step that would have a significant effect on preventing the spread of the virus—going 100% smokefree indoors.” Unfortunately for stoners, ANR also frowns upon toking in casinos, for the same reasons. “Smoke is smoke.” Had Coronavirus not come along, the AGA’s neutrality might be difficult to assail. However, present-day conditions are making smoky casinos look, at best, archaic.
Half-a-billion dollars. That’s how much legal wagering is expected on Super Bowl LV. That would make it the most bet-upon sporting event in American history. Last year’s handle was an impressive $300 million but six more states and the District of Columbia are now in the picture. Said PlayUSA analyst Dustin Gouker, “Half a billion dollars or more bet on one game seems almost unfathomable, but considering the direction of the U.S. market, that handle is easily within reach.” Mind you, there was $6.3 billion in illegal handle last year, so organizations like the AGA have their work cut out for them. Nevada is projected to lead the U.S. in legal handle, with $125 million, followed by $75 million from New Jersey. “It’s an intriguing matchup with two of the biggest names in the sport, Patrick Mahomes and Tom Brady, facing off, and that should help compensate for both teams being from relatively small markets,” Gouker said. The line on the game remains Kansas City Chiefs by three, promising a Super Bowl for the ages (in more senses than one, with Brady old enough to have fathered Mahomes.)
Illinois, expected to be third in Super Bowl handle with $60 million, posted a blockbuster November of sports betting. Wagering hit $451 million. Although Illinois punters avoid casinos like the plague, they’re mad for sports wagering, especially if they can do it online. Said PlayUSA’s Jessica Welman, “Illinois is rivaling markets such as Pennsylvania that are far more mature and just as large, and it’s doing it because the top online sportsbooks in the country are investing heavily in the market and Illinois bettors are responding with an unprecedented fervor.” Operators held slightly less than 10%, booking $41 million in revenue. What’s particularly impressive is that this was accomplished with no NBA and the Chicago Bears stinking up the joint with an 0-4 skid. No walk-up betting for two weeks, either, thanks to health restrictions. Remarked analyst Joe Boozell, “Such resilience shows that Illinois is maturing more quickly than anyone imagined.” No detailed breakdown of revenue is yet available, although DraftKings Casino Queen and BetRivers are expected by us to duel it out for the top spot, while Barstool, BetMGM and Unibet are strapping on their cleats for an imminent market entry.
Philadelphia Live does appear to be siphoning some business from Atlantic City—or at least making an enterprising try of it. Our Boardwalk correspondent reports, “Philly Live Casino is still all shiny and new. Our second trip was Sunday afternoon. There were a lot more people than our first trip. That was mid-week. Our third trip was tonight (Thursday, 1/28). Tonight it was lightly attended, they didn’t ask us if we had a reservation or a Player’s Card, just please come in and spend money. The restaurants are almost all ‘coming soon,’ which is why our visits are only 3.5-4 hours long. It’s interesting that they don’t have a good handle on the AC player’s cards to ‘trade up.’ The AC Hard Rock Royalty card is over the top and I think they must have read, but not understood the changes in Tier credits this year to be compatible with Hard Rock Tampa and Hard Rock Hollywood systems. Their brochure states ‘let the benefits do the talking’ and some of their upper tiers have ‘Black Car Service’ once a month, but they won’t tell you what kind of black car, a black Limo or a black VW Beetle.”
Mr. Greff is largely correct about the pent up demand, most seniors have not taken big hits during the pandemic, and they are ready for this to be over. Here in California the card rooms are opening back up for outdoor gaming, I expect it to be super crowded, the average card room consumer is older and more financially stable, many are retired. The unknown factor this time around is the impact of the vaccine, people here over 65 are eligible to be vaccinated, and the demand for those vaccinations is monster high. We will get to see next week if this is a thing, I have some doubts only because card room regulars are hardcore gamblers, I feel most players were willing to play outside last go round. Here in California they take the mask thing exponentially more serious than Las Vegas, if your mask goes below your nose you get one instant warning, then get ejected if it happens again. No drinks are allowed at the tables because of the mask rules, they have specific areas for you to go to drink a beverage. Nevada residents would skoff at such seemingly draconian rules apparently, but I appreciate them…