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In this article, we will be taking a look at the 14 best casino stocks to buy for 2023. To skip our detailed analysis of these stocks and the casino industry, you can go directly to see the 5 Best Casino Stocks to Buy for 2023.
Over three years ago, the US Supreme Court delivered a landmark judgment striking down the federal ban on sports betting. Since then, many states in the US legalized sports betting or are working on its legalization. This has resulted in the gambling and casino industry developing a whole new segment of online sports betting, one that has grown exponentially over the past few years and begun contributing significantly to the American economy.
Companies in the gambling sector like Caesars Entertainment Inc. (NASDAQ:CZR), MGM Resorts International (NYSE:MGM), and Boyd Gaming Corporation (NYSE:BYD) have always been around and have been performing well even before online sports betting became a contributor. However, since its legalization, the online gaming channel has helped the broader US gaming market bounce back from its downturn. According to a report on US online gaming published by MVB Bank this March, online sports betting accounted for over 80% of the all-time high of $4.29 billion in sports betting revenue in the US in 2021. It also generated an additional $3.71 billion in online casino revenue. This demonstrates the growing nature of this segment in the gaming industry, representing a lucrative investment opportunity for investors in the country.
According to the American Gaming Association's Commercial Gaming Revenue Tracker report for the first quarter, gross gaming revenue (GGR) has been growing exponentially in the US between 2019 and 2022. The total gross gaming revenue in the first quarter stood at $14.31 billion, representing an increase of 33.9% from the GGR in the first quarter of 2019, and an increase of 28.6% from the same quarter in 2021. This year's first quarter was the industry's best start to a year according to this report, showcasing an acceleration in gaming revenue of almost 29% year-over-year. Consumer spending on gaming in the country has also remained robust despite inflationary concerns and a slower economy, showing that this industry is not only a profitable investment option, but also a reliable one for investors moving into 2023.
Our Methodology
We have selected casino stocks with positive analyst ratings and price targets for our list below. These stocks were popular among the 920 hedge funds tracked by Insider Monkey in the third quarter of 2022, and are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.
Best Casino Stocks to Buy for 2023
14. Bally's Corporation (NYSE:BALY)
Number of Hedge Fund Holders: 11
Bally's Corporation (NYSE:BALY) is a casino and gaming company based in Providence, Rhode Island. The company operates through its Casinos & Resorts, North America Interactive, and International Interactive segments to offer physical and interactive entertainment and gaming experiences.
Barry Jonas, an analyst at Truist, holds a Buy rating on Bally's Corporation (NYSE:BALY) shares as of October 25. The analyst also placed a $29 price target on the stock.
Bally's Corporation (NYSE:BALY) is a casino stock with solid long-term liquidity and strong growth prospects in the long run. The company sold two of its real estate properties to Gaming and Leisure Properties, Inc. for $1 billion in 2022, a deal that can be a positive as it is increasing its liquidity on the balance sheet. As of this July, Bally's Corporation's (NYSE:BALY) revenue has grown by 54.7% over a 3-year period. It has a gross profit margin of 56.6%.
There were 11 hedge funds long Bally's Corporation (NYSE:BALY) in the third quarter, with a total stake value of $164 million.
Bally's Corporation (NYSE:BALY), like Caesars Entertainment Inc. (NASDAQ:CZR), MGM Resorts International (NYSE:MGM), and Boyd Gaming Corporation (NYSE:BYD), is a rising player in the casino sector that hedge funds are piling into today.
13. Red Rock Resorts, Inc. (NASDAQ:RRR)
Number of Hedge Fund Holders: 18
Red Rock Resorts, Inc. (NASDAQ:RRR) is a company that works through its interest in Station Holdco and Station LLC to develop and operate casinos and entertainment properties in the US. It is based in Las Vegas, Nevada.
On November 21, Morgan Stanley's Stephen Grambling initiated coverage of Red Rock Resorts, Inc. (NASDAQ:RRR) shares with an Overweight rating and a $52 price target.
Over the first nine months of 2022, Red Rock Resorts, Inc. (NASDAQ:RRR) had a revenue of $1.2 billion, up from the $1.1 billion revenue over the same period in 2021. This demonstrates the company's growing momentum while it heads into what analysts expect will be its best quarter of the year. Red Rock Resorts, Inc. (NASDAQ:RRR) also reported a free cash flow of $99.4 million or $0.96 per share, bringing its total free cash flow for the first nine months of 2022 to $325.7 million or $3.13 per share.
Red Rock Resorts, Inc. (NASDAQ:RRR) was found among the 13F holdings of 18 hedge funds in the third quarter, and 21 hedge funds in the previous quarter. Their total stake values were $165 million and $162 million, respectively.
Baron Funds, an investment management company, mentioned Red Rock Resorts, Inc. (NASDAQ:RRR) in its third-quarter 2022 investor letter. Here's what the firm said:
“Red Rock Resorts, Inc. (NASDAQ:RRR) is a leading real estate casino gaming company that owns and operates 100% of its real estate assets. The majority of the company’s cash flow is generated in the Las Vegas Locals market, a real estate market that possesses highly favorable long-term demand and supply prospects. The company has capacity to double the size of its business in the next five to seven years and maintains a strong balance sheet. Insiders own more than 40% of the company. With shares valued at only 8 times 2023 estimated cash flow (EBITDA) and a double-digit free cash flow yield, we think Red Rock’s share price is compelling.”
12. Marriott Vacations Worldwide Corporation (NYSE:VAC)
Number of Hedge Fund Holders: 20
Marriott Vacations Worldwide Corporation (NYSE:VAC) is a hotel, resorts, and cruise lines company that develops, markets, sells, and manages vacation ownership and related products. The company also operates casinos and gambling operations in various countries.
C. Patrick Scholes at Truist reiterated a Buy rating on Marriott Vacations Worldwide Corporation (NYSE:VAC) shares on November 15, and raised his price target on the stock from $202 to $205.
Marriott Vacations Worldwide Corporation (NYSE:VAC) has an impressive track record with dividends and share repurchases, making the stock an attractive investment. The company generated $506 million in contract sales in the second quarter of 2022, which is an increase of 40% over the previous year. Marriott Vacations Worldwide Corporation (NYSE:VAC) has also identified its addressable market in the US alone as 38 million households, with a median annual income of over $130,000. This helps the company protect itself in an economic downturn, considering that high earnings have a bigger financial cushion to deal with a temporary slowdown in earnings.
Rima Senvest Management was the largest stakeholder in Marriott Vacations Worldwide Corporation (NYSE:VAC) in the third quarter, holding 2.3 million shares worth $278 million. In total, 20 hedge funds were long the stock, with a total stake value of $575 million.
Baron Funds, an asset management company, mentioned Marriott Vacations Worldwide Corporation (NYSE:VAC) in its second-quarter 2022 investor letter. Here's what the firm said:
“Finally, timeshare leader Marriott Vacations Worldwide Corporation (NYSE:VAC) recently increased its outlook for new timeshare sales last month, boosted by very high occupancy, strong tour growth, and sustained spending per owner.”
11. Gaming and Leisure Properties, Inc. (NASDAQ:GLPI)
Number of Hedge Fund Holders: 22
Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) is a specialized real estate investment trusts company that acquires, finances, and owns properties to be leased to gaming operators. The company is based in Wyomissing, Pennsylvania.
Mitch Germain at JMP Securities initiated coverage of Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) shares with an Outperform rating an a $53 price target on September 23.
Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) is one of only two players in the publicly-traded REITs sector focusing on owning properties leased to gaming operators. This means the company has a big market opportunity to consolidate the real estate assets of casino companies. The company demonstrates strong growth prospects in light of its recent Bally's transaction, with the latter acquiring its non-land real estate assets for an initial cash rent of $10.5 million. Given this investment activity, among more, Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) management is now guiding for AFFO per share of $3.53, representing a growth of 2.6% from the AFFO per share of $3.44 in 2021.
Our hedge fund data shows 22 funds long Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) in the third quarter, and 30 funds long the stock in the previous quarter. Their total stake values were $371 million and $628 million, respectively.
Baron Funds, an asset management company, mentioned Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) in its second-quarter 2022 investor letter. Here's what the firm said:
“Gaming and Leisure Properties, Inc. (NASDAQ:GLPI), a gaming REIT that owns the real estate of many casino operators, contributed to performance on the strength of its well-covered dividend yield and prospects for growth even in a recessionary economy. Its tenants remain solvent and flush with cash, which suggests that rent payments should remain steady regardless of the economic environment. A strong balance sheet allows for additional acquisitions, which should be accretive to the dividend and enhance shareholder returns.”
10. Wynn Resorts Limited (NASDAQ:WYNN)
Number of Hedge Fund Holders: 23
Wynn Resorts Limited (NASDAQ:WYNN) is a designer, developer, and operator of integrated resorts. The company's Wynn Palace segment operates 424,000 square feet of casino space. It is based in Las Vegas, Nevada.
Morgan Stanley analyst Stephen Grambling initiated coverage of Wynn Resorts Limited (NASDAQ:WYNN) shares with an Equal Weight rating and a $77 price target on November 21.
This September, Wynn Resorts Limited (NASDAQ:WYNN) was observed to have been outperforming the broader market in light of positive news flow regarding China's reopening and relaxation of border restrictions. In August, the company's shares rose by 4.3% while the S&P 500 declined by 9%. Wynn Resorts Limited (NASDAQ:WYNN) also reported a revenue beat in the third quarter of 2022, generating revenue of $889.7 million, beating estimates by $22.28 million.
Out of 23 hedge funds long Wynn Resorts Limited (NASDAQ:WYNN) in the third quarter, Citadel Investment Group was the largest stakeholder, holding 2.4 million shares worth $153 million. The total stake value in the company was $191 million.
9. Hilton Grand Vacations Inc. (NYSE:HGV)
Number of Hedge Fund Holders: 29
Hilton Grand Vacations Inc. (NYSE:HGV) is a timeshare company that develops, markets, sells, and manages vacation ownership resorts under the Hilton Grand Vacations brand. The company is based in Orlando, Florida.
A Buy rating was reiterated on Hilton Grand Vacations Inc. (NYSE:HGV) shares on November 15 by analyst C. Patrick Scholes at Truist. The analyst also placed a $62 price target on the stock.
This October showed a significant recovery in Hilton Grand Vacations Inc.'s (NYSE:HGV) revenue and earnings growth as compared to last year. In the three months that ended June 30, the company's revenue in 2022 was $948 million, compared to $334 million over the same period a year ago. The recovery in revenue was particularly strong across the sales of vacation ownership interests, which stood at $361 million in 2022 and $76 million in 2021, over the same period.
Out of 920 hedge funds, 29 funds were long Hilton Grand Vacations Inc. (NYSE:HGV) in the third quarter. Their total stake value was $1.04 billion. In comparison, 26 hedge funds were long the stock in the previous quarter, with a total stake value of $1.04 billion then as well.
8. Penn National Gaming, Inc. (NASDAQ:PENN)
Number of Hedge Fund Holders: 30
Penn National Gaming, Inc. (NASDAQ:PENN) provides integrated entertainment, sports content, and casino gaming experiences in North America. The company is based in Wyomissing, Pennsylvania.
Morgan Stanley's Stephen Grambling initiated coverage of Penn National Gaming, Inc. (NASDAQ:PENN) shares with an Equal Weight rating and a $36 price target on November 21.
Penn National Gaming, Inc. (NASDAQ:PENN) has been performing well under tough macroeconomic conditions, and expects to remain profitable in 2023. In the third quarter, the company reported revenues of $1.6 billion, up 7.5% from the third quarter of 2021. It also reiterated its full-year guidance of revenue for 2022 to finish between $6.15 billion and $6.55 billion. Penn National Gaming, Inc. (NASDAQ:PENN) also brought in net income of $123.2 million, up 7.6% from the $86.1 million net income reported last year in the same quarter.
Holding 7.5 million shares in the company, HG Vora Capital Management was the largest stakeholder in Penn National Gaming, Inc. (NASDAQ:PENN) in the third quarter. The total value of these shares was $206 million. Overall, 30 hedge funds were long the stock, with a total stake value of $423 million.
Baron Funds, an investment management company, mentioned Penn National Gaming, Inc. (NASDAQ:PENN) in its third-quarter 2022 investor letter. Here's what the firm said:
“Shares of gaming company PENN Entertainment, Inc. (NASDAQ:PENN) declined 9.6% in the quarter and penalized performance by 10 bps. This was due to investor concerns that a potential recession would result in a slowdown or decline in its earnings growth rate. However, thus far, the company has seen no material change to visitation or spending levels, and its earnings remain strong. PENN is generating strong cash flow, which it continues to use to invest in its digital growth opportunity, while using excess cash to buy back its stock. PENN is well positioned to weather a slowdown or recession, and we believe that even if one does occur, the company would still generate revenue and EBITDA above pre-pandemic levels. We consider the $50 million of losses this year from its digital business to be modest in relation to PENN’s over $1 billion of EBITDA from its casino business. The losses from its digital business represent customer acquisition costs incurred as additional states legalize online gambling. Since it is far less expensive to retain existing customers than to acquire new ones, we expect marketing costs to decline as PENN builds its customer base. PENN’s core bricks and mortar casino business remains strong, and the company’s healthy regional casino business and strong balance sheet enable it to absorb its digital losses.”
7. Melco Resorts & Entertainment Limited (NASDAQ:MLCO)
Number of Hedge Fund Holders: 30
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) develops, owns, and operates casino gambling and resort facilities. The company is based in Hong Kong and owns City of Dreams, an integrated casino resort.
Kenneth Fong, an analyst at Credit Suisse, holds a Neutral rating on Melco Resorts & Entertainment Limited (NASDAQ:MLCO) shares as of October 17.
Melco Resorts & Entertainment Limited's (NASDAQ:MLCO) liquidity runway offers the company a solid buffer against any headwinds, and its current cheap valuation offers a compelling bargain to interested investors. There have been signs of stabilization in the company's overseas operations, and a second-quarter revenue recovery of 60% bode well for its outlook. Melco Resorts & Entertainment Limited's (NASDAQ:MLCO) liquidity position stood at $2.8 billion as of the second quarter.
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) had 30 hedge funds long its stock in the third quarter, and 24 funds long its stock in the second quarter. Their total stake values were $343 million and $264 million, respectively.
6. VICI Properties Inc. (NYSE:VICI)
Number of Hedge Fund Holders: 33
VICI Properties Inc. (NYSE:VICI) is a specialized REITs company owning one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations. Its portfolio includes the world-famous Caesars Palace.
An Overweight rating was reiterated on VICI Properties Inc. (NYSE:VICI) shares on October 24, by analyst Anthony Paolone at JPMorgan. The analyst also raised his price target on the stock from $35 to $36.
VICI Properties Inc.'s (NYSE:VICI) diversified portfolio centered on triple-net lease casino properties should be resilient against a possible recession in 2023. The company's third-quarter earnings have also managed to support a recent 8% dividend raise. Its revenue for the third quarter was $751.5 million, representing a 100% increase from the same quarter in 2021, and a $13.27 million beat on estimates.
Pentwater Capital Management was the largest stakeholder in VICI Properties Inc. (NYSE:VICI) in the third quarter, holding 3.9 million shares worth $116 million. In total, 33 funds were long the stock. Their total stake value was $307 million.
Meridian Funds, managed by ArrowMark Partners, mentioned VICI Properties Inc. (NYSE:VICI) in its second-quarter 2022 investor letter. Here's what the firm said:
“VICI Properties Inc. (NYSE:VICI) is a real estate investment trust company specializing in casinos and other entertainment properties. We invested in VICI in 2018 when earnings were declining due to dilutive acquisitions. Our thesis was that, as investors grew more comfortable with casinos as a REIT subsector, the value of their properties would increase. We also liked the defensive characteristics of the company, specifically the triple-net lease structure, which dictates that lessees pay all maintenance and capital expenditures, and the history of casino REITs with zero rent payments missed by casinos during either the global financial crisis or the 2020 pandemic. Furthermore, we were confident that VICI’s growth prospects would increase as more casinos monetized land holdings with VICI’s ability to use its extensive cash and liquidity to make acquisitions. VICI’s stock outperformed in the quarter due to its appeal as a fairly defensive investment and the news that it would be included in the S&P 500 Index. We maintained our position in VICI.”
VICI Properties Inc. (NYSE:VICI), like Caesars Entertainment Inc. (NASDAQ:CZR), MGM Resorts International (NYSE:MGM), and Boyd Gaming Corporation (NYSE:BYD), is a gambling stock many institutional investors are eyeing this year.
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Disclosure: None. 14 Best Casino Stocks to Buy for 2023 is originally published on Insider Monkey.
