The casino industry faces a mixed bag of opportunities and challenges as it heads into 2025. According to Jefferies Equity Research, U.S. regional casinos will experience limited growth amidst rising competition and economic uncertainties, while Macau’s gaming revenues are expected to recover to pre-pandemic levels by 2026.
U.S. Regional Casinos: Growth on a Tight Leash
Jefferies analyst David Katz predicts constrained growth for regional casinos in the U.S., driven by increasing competition and macroeconomic uncertainties. Emerging markets such as Chicago, Indiana, Omaha, and Shreveport/Bossier City are poised to see new property openings, further tightening the competitive landscape.
Marketing budgets, carefully controlled post-COVID, are likely to face renewed pressure as operators vie for customer loyalty. However, the report suggests that significant industry changes, such as shifts in leadership, ownership, or strategies, could occur by 2025.
Las Vegas operators like MGM Resorts International and Caesars Entertainment find themselves at a critical juncture. Katz pointed out that while their current execution requires improvement, these stocks remain attractively priced, presenting investment opportunities that are “too inexpensive to ignore.”
Las Vegas: A Tale of Supply and Demand
Las Vegas’s unique position as a demand-driven market with limited new supply offers both stability and stagnation. Over the next two years, the city’s casino sector is expected to benefit from:
- A strong event calendar
- Growth in group and convention business
- An aging population that may drive local casino traffic
Despite these advantages, revenue is forecast to remain flat or show minimal growth due to closures at Tropicana Las Vegas and The Mirage on the Strip. Caesars and MGM, as market leaders, could emerge as key beneficiaries under these conditions.
Wynn Resorts, known for its undervalued assets and strong execution, also stands out. Boyd Gaming is anticipated to perform better in 2025, buoyed by favorable year-over-year comparisons and progress on its Norfolk, Virginia, casino project. Meanwhile, Station Casinos faces potential growth obstacles tied to construction disruptions.
Macau: A Gradual Path to Recovery
In Macau, optimism surrounds a return to pre-pandemic revenue levels by 2026. China’s economic stimulus measures are expected to play a pivotal role in this recovery. However, growth in the region is projected to decelerate from 22.5% in 2024 to just 5% in 2025.
Las Vegas Sands is well-positioned to capitalise on its focus on suite products and mass-market offerings, likely capturing market share from Wynn. Yet, non-gaming revenue—a focal point for Beijing’s diversification push—remains a challenge. Despite policy initiatives, non-gaming revenue in Macau dropped from $411 million in 2019 to $378 million in 2023.
Jefferies’ Stock Adjustments Reflect Sector Outlook
Jefferies made several upgrades and downgrades to casino stocks, reflecting their nuanced outlook:
- Boyd Gaming: Upgraded from Hold to Buy, with a price target increased to $92.
- Las Vegas Sands: Upgraded from Hold to Buy, with a price target raised to $69.
- Station Casinos: Downgraded from Buy to Hold, with the price target reduced to $51.
Other changes included:
| Stock | Previous Target | New Target |
|---|---|---|
| Golden Entertainment | $31 | $32 |
| Monarch Casino & Resort | $72 | $88 |
| Penn Entertainment | $21 | $22 |
Meanwhile, Churchill Downs and Bally’s Corp. retained unchanged ratings at $172 and $17, respectively, while Caesars, MGM, and Wynn saw lowered price targets to $43, $50, and $105.
The Road Ahead: Adaptability and Strategy
The casino industry may face a shakeup in 2025, with Katz emphasising potential changes in leadership, ownership, or strategic approaches. Shareholder activism is expected to shape Penn Entertainment’s focus on land-based operations and online gaming strategies.
Despite challenges, the report underscores opportunities for investors and operators willing to adapt. For key players like Caesars, MGM, and Wynn, the next two years will test their ability to balance execution with market dynamics, paving the way for sustained relevance in a competitive landscape.
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