Local gambling enthusiasts contribute significantly to Q2 earnings, as suggested by analysts
Article Title: Analyst Predicts Bright Future for Las Vegas Locals Casinos
In a recent report, Barry Jonas, an analyst at Truist Securities, has expressed optimism about the outlook for Las Vegas locals casinos. Jonas upgraded Red Rock Resorts (RRR) to a "buy" rating, citing resilience in the locals segment, favorable population trends, and benefits from the "One Big Beautiful Bill Act" which removes taxes on tips.
Jonas believes that Red Rock Resorts, with its best-in-class properties, is well-positioned to benefit from the continued flight to quality among customers. He also points to strong gaming revenue growth in the locals market, which was up 10%, contributing to a 3.5% statewide increase in gross gaming revenue.
However, not all casinos are expected to perform equally. Golden Entertainment was moved to the "hold" column due to softness at the Strat and lack of merger activity. Relative weakness at GLPI is attributed to delays and uncertainty surrounding in-progress Bally's Chicago.
Despite these challenges, Jonas expects Station Casinos and Boyd Gaming to beat their cash-flow targets by 5% and 4%, respectively. He also predicts a revenue boost of up to $85 million from the rescinding of taxes on tips for Station.
On the national stage, Jonas expects Flutter Entertainment, the parent company of DraftKings and FanDuel, to beat forecasts. However, he admits that the outlook is more uncertain due to rising tax rates, legislative noise, and prediction market uncertainty.
In the REIT sector, Jonas expects Vici and GLPI to continue demonstrating creativity but faces challenges in the merger-and-acquisition climate. He also sees potential expansion for the new Durango Resort due to reduced leverage.
Looking ahead, Jonas repriced his target for the Station stock to $67 per share, up from $45 apiece. He also noted that tax increases have occurred in Illinois, New Jersey, and Louisiana, and promotional tax deductions have been removed in Colorado, with similar trends expected in Maryland and Pennsylvania.
Operators in Las Vegas are expecting second-quarter softness to continue into the third trimester due to a major Jewish holiday shift in 2025. However, they are pinning their hopes on 2026 for easier comparisons and the return of the Con/Agg expo.
Jefferies Equity Research analyst David Katz predicts a "grind-y summer" for Strip operators but expects a strong fourth quarter and FY26 due to a strong group/entertainment slate. Truist analyst Brendan Bussmann expects Pennsylvania to remove promotional deductibility, potentially affecting the digital sector.
In conclusion, while there are challenges ahead, analyst Barry Jonas of Truist Securities remains optimistic about the future of Las Vegas locals casinos. With strong performance in the second quarter and potential for more upside, investors may find these casinos an attractive investment opportunity.
Finance-related sectors, such as Las Vegas locals casinos, are projected to see growth, according to Truist Securities analyst Barry Jonas. In the casino-and-gambling industry, Red Rock Resorts is expected to benefit significantly from the removal of taxes on tips and its strong gaming revenue growth.
