2 play stocks to buy, 2 to avoid
The gaming industry is expected to thrive in the post-pandemic environment due to the rebound in the tourism industry and the increase in disposable income. Additionally, online gambling and sports betting are becoming extremely popular due to advanced technologies and increased convenience. In this environment, we believe that the shares of fundamentally sound companies Full House Resorts (FLL) and International Game Technology (IGT) could be ideal bets. However, we are concerned that DraftKings (DKNG) and Las Vegas Sands (LVS) may not be able to take advantage of industry tailwinds due to weak fundamentals. So we think it’s best to avoid these stocks now. Continue reading.
The gaming industry was hit hard when strict restrictions were imposed on travel and entertainment activities in response to the COVID-19 pandemic. However, the launch of online gambling has helped the industry significantly offset the losses caused by the pandemic. Advanced technologies and convenience should help online gambling continue to grow in popularity. Gaming revenues have reached all-time highs in 2021, thanks to digital domain integrations and a growing trend in society to legalize sports betting.
Along with the growing popularity of online gambling, a potential increase in travel and tourism and an increase in disposable income are expected to lead to a significant increase in the footprint of brick-and-mortar casinos. The US casino industry is currently worth over $261 billion and provides 1.8 million jobs nationwide.
Given the sector’s growth outlook, we think fundamentally sound stocks Full House Resorts, Inc. (FLL) and International Game Technology PLC (IGT) could be quality additions to a portfolio. However, DraftKings Inc. (DKNG) and Las Vegas Sands Corp. (LVS) do not seem well positioned to take advantage of industry tailwinds. So these stocks are best avoided now.
Stocks to buy:
Full House Resorts, Inc. (FLL)
FLL in Las Vegas owns, develops, invests, operates, manages and leases casinos and related hospitality and entertainment facilities. It manages its casinos based on geographic regions in the United States.
FLL’s revenue increased 13.1% from the prior year quarter to $43.27 million during its fourth fiscal quarter ended December 31, 2021. Its net income for the quarter amounted to $5.05 million, reflecting a 44.2% year-over-year increase, while its EPS came in at $0.14, up 16.7% year-on-year. year to year.
The consensus EPS estimate for its fiscal first quarter, ended March 31, 2022, represents an 86.6% year-over-year improvement. The consensus revenue estimate of $42.37 million for the same quarter represents a 0.4% increase over the same period last year. He has an impressive history of winning surprises; it has exceeded street EPS estimates in three of the last four quarters.
FLL’s stock has gained 10% in price over the past three months to close the last trading session at $9.01.
FLL’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
FLL also has a B rating in Sentiment. It is ranked #7 out of 33 stocks in the Entertainment – Casinos/Gaming industry.
Beyond what is stated above, we also rated FLL for momentum, stability, value, quality and growth. Get all FLL ratings here.
International Game Technology PLC (IGT)
IGT is an end-to-end gaming company that operates and provides gaming technology products and services. The London-based company operates in three segments: Global Lottery; global game; and Digital and Paris.
On April 14, 2022, IGT announced the introduction of its Infinity Instants games to transform and enhance the design and gameplay of instant tickets using innovative printing techniques. “The technology behind Infinity Instants disrupts and revolutionizes traditional instant ticket printing and supports IGT’s commitment to providing innovative, player-tested, and growth-driving solutions for lotteries,” said Jay Gendron, IGT COO. , Global Lottery.
The company also announced the extension of its patent cross-licensing agreement with Aristocrat Leisure. Under this agreement, IGT will be able to license the companies’ combined game features and RGS patent portfolios to the global gaming industry.” This combination of two of the most valuable game features in gaming industry and RGS patent portfolios can help propel the evolution of gaming with compelling content and advanced game mechanics,” said Renato Ascoli, CEO of IGT Global Gaming.
IGT’s total revenue increased 18.6% year-over-year to $1.05 billion in its fiscal fourth quarter, which ended Dec. 31, 2021. Its earnings of operating total rose 93.8% from its value a year ago to $186 million, while its total non-GAAP EBITDA improved 31.2% from a year-over-year to $387 million. The company’s net cash from operating activities increased 57.8% from its value a year ago to $396 million.
Analysts expect IGT’s revenue for its fiscal quarter ended March 31, 2022 to be $1.03 billion, indicating a 1.9% year-over-year increase. other. Additionally, the company’s EPS is expected to increase 68.5% year-over-year to $0.33 in the same quarter.
Shares of IGT have gained 21.7% in price over the past year to close the last trading session at $21.25.
It’s no surprise that IGT has an overall rating of B, which equates to Buy in our POWR rating system. IGT also has a B rating in value and quality. It is ranked #8 in the Entertainment – Casinos/gambling industry.
In addition to the POWR ratings I just highlighted, you can see IGT’s ratings for growth, momentum, stability, and sentiment here.
Actions to avoid:
DraftKings Inc. (DKNG)
Boston-based DKNG operates as a digital sports entertainment and gaming company in the United States and internationally through business-to-consumer and business-to-business.
For its fiscal year ended Dec. 31, 2021, DKNG’s operating loss increased 85.2% year-over-year to $1.56 billion. Its net loss for the period increased 23.7% from the year-ago quarter to $1.52 billion. And its net cash used in operating activities was $419.51 million, up 116.1% from the year-ago quarter.
The negative consensus EPS estimate of $1.20 for its fiscal first quarter, ended March 31, 2022, indicates a 37.9% year-over-year decline. Additionally, EPS estimates are expected to fall 2.1% to $3.86 for its fiscal year ended December 31, 2022.
The stock is down 76.5% over the past year and 71.6% over the past nine months to close yesterday’s trading session at $13.87.
DKNG’s POWR ratings reflect this bleak outlook. The stock has an overall rating of F, which equates to a strong sell in our proprietary rating system.
DKNG has a stability rating of F and growth, value, sentiment and quality ratings of D. In the Entertainment – Casino/Gambling Industry title is ranked #33. Click here to see additional POWR ratings for DKNG (Momentum).
Las Vegas Sands Corp. (LVS)
LVS in Paradise, Nevada, is a global developer of destination properties. It owns and operates integrated resorts in Asia and the United States. Its main operating and development activities are carried out in three geographical areas: Macau; Singapore; and the United States.
In February, LVS announced the completion of the sale of The Venetian Resort to Apollo Global Management, Inc. and VICI Properties Inc. for approximately $6.25 billion. The company will reinvest the cash proceeds into its Asian portfolio and pursue land development opportunities.
For its fiscal quarter ended March 31, 2022, LVS’s net revenue decreased 21.2% year-over-year to $943 million. Its operating loss fell 214.6% from the year-ago period to $302 million. The company’s adjusted EBITDA was $110 million, down 54.9% from the prior year period.
TheStreet expects the EPS estimate for the fiscal second quarter ending June 30, 2022 to be negative $0.07. Additionally, the company was unable to exceed consensus EPS estimates in three of the last four quarters.
The stock has fallen 42.6% over the past year to close yesterday’s trading session at $34.84. It has fallen 20.1% over the past nine months.
LVS’s POWR ratings are consistent with this bleak outlook. It has an overall D rating, which translates to Sell in our proprietary rating system. The stock also has a D rating for value and stability. It is ranked #28 in the Entertainment – Casinos/gambling industry.
To view additional POWR ratings for Quality, Growth, Momentum, and Sentiment for LVS, click here.
FLL shares were flat in premarket trading on Thursday. Year-to-date, the FLL is down -25.60%, compared to a -10.90% rise in the benchmark S&P 500 over the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue her career in investment research. Its fundamental approach to stock analysis helps investors identify the best investment opportunities.
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