Gaming Industry To Sustain Stellar Show In 2018: 4 Solid Buys
Zacks Investment Research | Mar 14, 2018 10:14PM ET
The casino gaming industry has been experiencing stellar growth since the second half of 2016. The bullish trend is expected to continue through 2018 and beyond. According to Research and Markets, the global casino gaming market is anticipated to witness CAGR of 10.16% in the 2017-2021 period. Technavio estimates that the U.S. casino gaming market will witness CAGR of close to 5% from 2017 to 2021.
Recent numbers published by The Macau Gaming Inspection and Coordination Bureau are also encouraging. In February 2018, gross gaming revenues increased 5.7% year over year to roughly $3 billion or 24.3 billion patacas. This marked the 19th month of consecutive gains and the third highest in the past year.
Although Nevada’s casino gaming win dropped by 2.1% in January, it crossed the $1 billion mark. Notably, it was the first time in the past 12 months that revenues were in excess of $1 billion.
Despite the fact that demand in the space is relatively inelastic and a fixed range of consumers will continue to demand services irrespective of market conditions, there are good reasons why growth should persist over the next few years.
Improving Tourism Dynamics
Destinations like Las Vegas and Macau are gambling hotspots. The popularity of entertainment and gambling, in both hotels and casinos, has in fact aided these cities form a tourism economy unlike any other place on earth.
The Chinese government is considering measures to support all aspects of Macau’s economy and introduce favorable policies. These are expected to improve visitation pattern and boost tourism and traffic in the region. One such move is the approval of Macau’s maritime expansion plans that are expected to aid shipping and tourism and mainland Chinese cities to offer multi-entry permits. Per the Macao Government Tourism Office (MGTO), total visitations to Macau in 2017 increased 5.4% from 2016.
Though tourism in Las Vegas has not yet reached pre-recession levels, it is on its way to recovery. Per the year-end report from the Las Vegas Convention and Visitors Authority, total visitors were down 1.7% year over year in 2017. However, convention attendance increased.
Governments Reducing Restrictions
Given the prospects of taxes (as high as 25%) on earnings and the fact that the gaming industry employs a large number of people, governments across the world are moving to reduce restrictions on gambling.
In Nevada, the government has been lowering restrictions. Also, there is a new bill that could lower the legal gambling age limit from 21 to 18 years. In few states, for games such as bets on horse racing in Arkansas, Delaware, Florida, Indiana, Louisiana, Maine, New Mexico, Ohio, Pennsylvania and Washington, the legal age is already 18 years.
Gambling remains illegal in Brazil and Japan but governments in both these countries are growing more receptive to the idea, which is a positive development for the industry.
Tribal casinos in Alaska, Idaho, Minnesota and Wyoming are also legal for 18-year olds. Although the age group is not likely to have a lot of extra cash, this could expose them to gambling at an earlier age thereby increasing potential revenues for the industry in the future.
Having More Money to Spend
Per numbers provided by the U.S. Bureau of Economic Analysis (BEA), real disposable income rose through 2017. While it peaked in June and dropped thereafter owing to the impact of hurricanes Harvey and Irma, it has risen again and remains much higher than it was a year ago.
Latest estimates from BEA suggest that personal income was up $64.7 billion (0.4 %) in January. Disposable personal income (DPI) rose $134.8 billion (0.9%) and personal consumption expenditures (PCE) was up $31.2 billion (0.2%). This is a positive for the gaming market as it indicates that people have more money to spend on leisure.
The Japan Expansion
Japan is likely to hold the key for casino companies in 2018. The country is expected to approve two more gaming licenses in the year. Estimates indicate that Japan’s market could be worth $40 billion. Major casino players have made Japan their top priority for 2018, with Las Vegas Sands Corp. (NYSE:LVS) coming up with an outlay of around $10 billion for building a single resort.
4 Stocks to Bet On
With the help of the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.