Adelson abandons Vegas; Boyd salvages bad quarter

Does this mean Sheldon will go away and leave us alone with his Jurassic mentality? Will he stop his futile fist-shaking at Internet gambling? What happens to the ego-stroking MSG Sphere? Will he sell the Las Vegas Review-Journal, no longer having a hometown to which to dictate its thinking? Will he stop interfering in people’s private lives, such as blocking medicinal marijuana in Florida? (Florida?!?) Except for his employees, whom Adelson has treated very well, few Las Vegans would be sorry to see him go.

It was a mixed bag of earnings for Boyd Gaming in its 3Q20 report. Cash flow was up in the Las Vegas locals segment (23%) and in the Midwest/South one (17%) but fell through the floor in Downtown (-113% and, no, that’s not a typo). Despite having fewer casinos on line, operating expenses actually went up. Net revenue fell 20% in the locals sector, to $171 million, plummeted 75% Downtown to $17.5 million, and slid 15% in Midwest/South to $463.5 million. JP Morgan analyst Joseph Greff was not discouraged, writing that “We see higher margins relative to history, given BYD’s (and the domestic gaming industry’s) now permanently lower opex structure and resilient demand from dedicated/high-value customers.” He added, “Furthermore, we see BYD as a (still) fully underappreciated way to participate in the emerging and attractive U.S. Sports betting and iGaming opportunities.”

Was that the only reason Greff hiked his price target from $43/share to $49? No, Wall Street actually expected Boyd to do worse last quarter. So today’s numbers come as a pleasant surprise on The Street. Consistent regional play, lower labor costs and reduced marketing were all credited toward the beat. He added that cash flow would have been $4 million better, an “upside [that] would have been stronger were it not for disruption in LA and MS related to two hurricanes.” (Who says climate change is good for business?) “The question that is unanswerable right now is the degree to which these margins are sustainable and permanent,” Greff summarized. He thinks operating margins will continue to be moderately higher over the next two years as more employees return to work. What impressed him most is that Boyd’s “highest rated players have been very sticky with relatively equal frequency of visit and spending post-COVID-19 versus pre-COVID-19.” You can be sure that’s a metric that management is monitoring closely.

In a historic moment for NFL betting, the Kansas City Chiefs are a consensus 20.5-point favorite next weekend. Then again, their opponent will be the “historically bad” New York Jets, which dims the accomplishment somewhat. Yes, FanDuel, DraftKings, PointsBet, SugarHouse and BetMGM all agree. Reports TheLines.com, “only eight games in modern history have featured a closing point spread of 20 points or more. And only once in the last 10 years has the NFL schedule featured a game with a larger point spread than this week’s game—the Denver Broncos were favored by 28 points in a 2013 game against the Jacksonville Jaguars. The only other game in the last decade with a spread of 20 points came in 2011 when the New England Patriots were favored by 20.5 points against the Indianapolis Colts.” Neither Denver nor the Pats covered those spreads, by the way.

Said analyst Brett Collson, “These are typically the hardest games to handicap, because a game with such a talent disparity can be so unpredictable. It certainly adds interest to a game that otherwise would feature little intrigue.” Except for Tampa Bay‘s 10.5-point edge on the inept New York Giants, all other spreads pale in comparison. That’s good news for the Las Vegas Raiders, three-point underdogs to the Cleveland Browns … but remember that the Pittsburgh Steelers recently exposed the Browns as paper tigers.

Lots of news today … but I am also scheduled to attend (virtual) Global Gaming Expo, so dispatches will be filed as time permits.