Amidst the tumult of tariff disputes, the gambling sector remains unyielding.
Rewritten Article:
The rollercoaster ride of the economy courtesy of President Trump's tariff policies has sent shockwaves through various industries, but gambling analysts remain hopeful about the sector's resilience.
Highlights:
- The gambling industry might endure economic uncertainties better than other sectors
- Sports betting promises a promising performance during potential recessions
- accelerating gambling legalization at state levels could be a consequence of economic pressure
Tariff Upheaval and Market Response
President Trump's recent "Liberation Day" proclamation signaled a radical new global tariff scheme, stirring up a storm in the stock market. While gambling stocks initially felt the heat, most tariffs have since been delayed for 90 days, with a universal 10% charge remaining.
Jordan Bender, analyst at Citizens Capital Markets and Advisory, shed light on why the delay doesn't change much for the gambling industry. "In essence, prices rising, and consumer apprehension aren't great signals for discretionary spending in the casino sector, regardless of whether the reality matches the hype or not," Bender pointed out.
Paul Leyland, partner at Regulus Partners, proposed a glimmer of hope for the industry: "Though macroeconomic risks to gambling affect everyone, it's a silver lining in a cloud of chaos."
Gambling's Recession Resilience
Analysts agree that gambling often weathers recessions better than other sectors. Chad Beynon of Macquarie Group emphasized that during the last financial crisis, UK digital gambling witnessed a slight dip of 1-2%, while US land-based gaming faced an approximately 8% hit.
Bender from Citizens added, "We believe affordable, content-driven entertainment, conveniently located, has the potential to snag a chunk of people's wallets during a downturn."
Sports Betting's Robust Positioning
Sports betting shows promise during economic downturns. Bender noted, "Nevada (an established market) sports betting handle, excluding the Strip, shrank by only 2% from peak to trough during the GFC, while handle per adult dwindled by 4% peak to trough."
Long-term Impact and Future Developments
Current tariff policies could significantly reshape company valuations. Beynon explained, "Usually, these stocks ride on free cash flow yields and price-to-earnings multiples. China has been trading at 11 times earnings for a while now. The US is trading at 20 times earnings."
State Legalization Push
A possible advantage of economic turmoil could be the accelerated gambling legalization efforts at state level. Both Beynon and Bender hinted at this possibility, with Beynon stating, "There's a good chance that states might legalize or permit gaming during deficit or recessionary periods."
As the industry soldiers through these rough waters, companies may exercise caution when providing guidance during the upcoming earnings season, leading to added volatility in the market.
- The gambling industry, despite the economic uncertainties caused by tariff policies, may exhibit resilience due to its ability to endure potential recessions better than other sectors.
- In the event of a recession, sports betting could show a robust performance as it has proven to shrink only minimally during the Global Financial Crisis.
- The delay in tariffs has minimal impact on the gambling industry, as increasing prices and consumer apprehension could hinder discretionary spending in the casino sector.
- As a consequence of economic pressure, there might be an accelerated push for gambling legalization at state levels, potentially leading to increased business opportunities in the casino-and-gambling industry during deficit or recessionary periods.
