In a note to clients this week, analysts at Macquarie Research reiterated MGM Resorts (NYSE:MGM) and Caesars Entertainment (NASDAQ:CZR) as their gaming industry top picks that have Vegas exposure.
Focusing on the industry performance in November, analysts who headed the note, stated that the Vegas strip generated revenue of $821m in November (+23% YoY), the third-highest GGR total ever and a new record for November.
As a result, the investment research firm expects Vegas segments to beat expectations in the fourth quarter by mid-single digits, driven by both strong RevPar and GGR growth.
The firm has an Outperform rating on both CZR ($62 price target) and MGM ($58 price target). "We expect Vegas segments to beat expectations in 4Q by mid-single digits, assuming similar market shares for MGM, CZR, and WYNN and minimal cyber-attack disruptions," analysts wrote.
"Given Nov's strong Strip results, we are increasing our 4Q Strip GGR forecast to +8% YoY (from -1% YoY), which implies +6% GGR growth in 2023," they added.
The firm views November's results as incrementally positive for Strip operators relative to current expectations, with the biggest surprise coming from increased GGR on tables/bacc and likely driven by higher-end F1 customers (among other events like U2's concerts at the Sphere).
They note that the month's results are also consistent with recent commentary by MGM mgmt that F1's attendance of over 300,000 drove the highest-grossing weekend for MGM's hotel revenues.
"We maintain that the future remains bright in Vegas with the additions of recurring events like F1 and the Sphere and eventually the MLB, which not only bring in additional hotels revs but can be drivers of GGR growth in 2024 and beyond," analysts stated. "Nov's results are also a positive read-through for 1Q24, which includes Vegas hosting Super Bowl."