In this piece, we will take a look at the ten largest gambling stocks of 2023. If you want to skip our overview of the casino industry and important economic news, then check out The 5 Largest Gambling Stocks of 2023.
Gambling is perhaps the best example of a consumer discretionary industry whose fortunes rise and fall with the ability of players to spend significant amounts of money on games of chance that always carry the risk of losses.
While the casino and gaming sector was hit by the coronavirus pandemic, inflation and a recovery in discretionary spending have enabled casinos and other establishments to report higher revenues. Casino revenues are generated from the players and are commonly referred to as winnings. These winnings represent the net cash flow to the casino after accounting for amounts that visitors might have won during their game playing.
In 2023, the casino and gaming industry in America has been setting new records. According to data from the American Gaming Association (AGA), the second quarter set the record for the second highest winnings reported by casinos operating all over the U.S. The quarterly record was for Q1 2023, and the data shows that consumers have started to recover from the severe inflationary pinch of 2022. The AGA's monthly gaming revenue tracker shows that growth rates dropped to 15 month lows in July 2022 and stood there in August 2022 before slightly recovering for the next couple of months and returning to the low levels in November.
In dollar terms, gaming revenue stood at $16 billion in Q2 2023, showing that even though the annual growth rates remained low in July, the dollar revenues showed a recovery. Revenue from slot machines accounts for most of the overall gaming revenue reported by the AGA, and just like other businesses, casino companies are coming up with innovative ways to see if slot players can be enticed to spend more money at the machines.
Slot machines typically give tickets at the end of a user's session, which shows the winnings or losses at the end of a session. However, casinos are checking to see if a new approach, called ticket in, bonus out (TIBO), could see players spend more time at a machine if they received free bonus runs at the end of a slot session. Casino systems firm Acres Manufacturing and operator Maverick Gaming are planning to launch TIBO slot machines on casino floors next year. The new approach to generating gaming revenue comes as online and physical betting on sports and iGaming which includes games such as poker are the fastest growing segments of the broader gaming revenue. Both these segments either set or met quarterly records as of June end, while slots grew by a hairline of 0.9% during the same time period.
Gambling spending is tied to the ability of players to earn stable incomes, and on that front, the Labor Department's latest JOLTS job report provided a stark set of results. These show that by the end of August 2023, job openings across the U.S. stood at 9.6 million while only 200,000 more people were hired than the number of those who left their jobs. The dataset fed into existing investor worries about a rate hike from the Federal Reserve in November, since the latest data set was the first time that the number of job openings grew over the past three months. In fact, the labor market added 690,000 new jobs at August end, which was the highest additions figure for two years.
If interest rates are left higher, then the environment for both businesses and consumers remains tight. For the gambling industry, higher rates can mean that players have a lower income to spend on making bets as their credit card payments or loan repayments are higher. For casinos, higher interest rates mean that their financing costs for new establishments or equipment can rise. This tightness is reflected in the S&P500, which is down by 1.56% late noon as investors grow cautious about the future economic outlook.
For their trailing twelve month performance, most big casino companies have recently started to manage costs and beat market expectations. For instance, one of Las Vegas' most famous casino operators MGM Resorts International (NYSE:MGM) has beaten analyst EPS estimates in two of its four latest quarters, and both of the beats were in the most recent ones. Likewise, Caesars Entertainment, Inc. (NASDAQ:CZR) also beat analyst EPS estimates for Q2 2023 after missing them during the prior two.
As a whole, while the gambling industry is dominated mostly by land based players, the gambling industry is made of firms that also provide online betting products, which are also the fastest growing segments. Today, we'll look at the biggest gambling stocks, and the top three are DraftKings Inc. (NASDAQ:DKNG), MGM Resorts International (NYSE:MGM), and Las Vegas Sands Corp. (NYSE:LVS).
The 10 Largest Gambling Stocks of 2023
A technician working on a slot tournament terminal in a large casino. Editorial photo for a financial news article. 8k. --ar 16:9
Our Methodology
To compile our list of the biggest gambling stocks, we simply made a list of the ten most valuable gambling firms in terms of market capitalization that are traded on U.S. stock exchanges. As added context, the number of hedge funds that had owned their shares during Q2 2023 is also provided through data from Insider Monkey's database.
PENN Entertainment, Inc. (NASDAQ:PENN) is one of the biggest casino companies in the world, with more than twenty thousand employees. It has 43 casinos across 20 states. The firm has also managed to beat analyst EPS estimates in three of its four latest quarters, leading other big casino gaming names.
As of June 2023, 23 out of the 910 hedge funds profiled by Insider Monkey were PENN Entertainment, Inc. (NASDAQ:PENN)'s investors. Out of these, the firm's largest shareholder is Parag Vora's HG Vora Capital Management since it owns 14.5 million shares that are worth $348 million.
Along with MGM Resorts International (NYSE:MGM), DraftKings Inc. (NASDAQ:DKNG), and Las Vegas Sands Corp. (NYSE:LVS), PENN Entertainment, Inc. (NASDAQ:PENN) is one of the biggest gambling stocks in 2023.
9. Melco Resorts & Entertainment Limited (NASDAQ:MLCO)
Latest Market Capitalization: $3.99 billion
Number of Hedge Fund Investors In Q2 2023: 29
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) is a global casino company that is headquartered in Hong Kong. Since several of its resorts and casinos are in Asia, it has seen revenues grow after restrictions were lifted. The stock is up 18% over the past year but is down 22% year to date. However, the shares are rated Strong Buy on average and analysts have penned in a $7 upside over the current $9 market price.
After digging through 910 hedge funds for their second quarter of 2023 investments, Insider Monkey discovered that 29 had owned and invested in the company. Melco Resorts & Entertainment Limited (NASDAQ:MLCO)'s biggest investor among these is Ken Griffin's Citadel Investment Group due to its $130 million stake.
Boyd Gaming Corporation (NYSE:BYD) is an American gaming company headquartered in Las Vegas, Nevada. The firm has operations in ten states. Like other casino companies, it is also expanding into the digital world, and revenues from this segment grew by 45% during the second quarter.
By the end of this year's second quarter, 35 hedge funds out of the 910 part of Insider Monkey's research had bought and owned Boyd Gaming Corporation (NYSE:BYD)'s shares. John W. Rogers' Ariel Investments is the largest stakeholder through its $215 million investment.
International Game Technology PLC (NYSE:IGT) is a diversified gambling technology firm with a strong presence in the online gambling and lottery markets. These days, it looks like the company wants to put all its focus on the digital world since unconfirmed reports suggest that International Game Technology PLC (NYSE:IGT) is looking to sell its slot machine business.
After digging through 910 hedge funds for their June quarter of 2023 investments, Insider Monkey discovered that 32 had held a stake in the company. International Game Technology PLC (NYSE:IGT)'s biggest hedge fund investor is Israel Englander's Millennium Management since it owns $59.8 million worth of shares.
Light & Wonder, Inc. (NASDAQ:LNW) is a diversified gambling company that offers slot machines, digital gambling games, and other software products and services. The firm is not doing well on the financial front these days, by missing analyst EPS estimates in three out of its four latest quarters. Growing slot revenue in the industry helped Light & Wonder, Inc. (NASDAQ:LNW) during its second quarter, as the firm's gaming machine sales grew by 41% annually with the broader gaming revenue growing by 21% annually during the same time period.
Insider Monkey took a look at 910 hedge fund portfolios for this year's second quarter and found 22 Light & Wonder, Inc. (NASDAQ:LNW) shareholders. Out of these, Debra Fine's Fine Capital Partners owns the largest stake which is worth $616 million.
DraftKings Inc. (NASDAQ:DKNG), Light & Wonder, Inc. (NASDAQ:LNW), MGM Resorts International (NYSE:MGM), and Las Vegas Sands Corp. (NYSE:LVS) are some of the biggest gambling stocks this year.
