While many industries struggle during economic challenges, the entertainment industry seems well equipped to weather these challenges owing to its nature of constantly evolving and adapting to consumer needs and preferences. Moreover, people are often willing to spend money on entertainment and recreational activities, such as gambling.
Therefore, in this article, we will look at three entertainment stocks, Boyd Gaming Corporation (BYD), International Game Technology PLC (IGT), and Monarch Casino & Resort, Inc. (MCRI), showing strong momentum, could prove to be solid portfolio additions.
The entertainment industry is set to experience long-term growth due to rapid urbanization, widespread high-speed internet connectivity, higher disposable incomes, and a growing consumer preference for recreational activities. The global location-based entertainment market is expected to grow at an impressive CAGR of 28.8% from 2023 to 2030.
On top of it, the gaming landscape is undergoing a significant transformation due to the rapid penetration of the internet and the widespread use of smartphones. This has resulted in a fundamental shift in the way people access and engage with online casino gaming platforms, making them more easily accessible than ever before.
After online gambling was legalized in the United States in 2018, the market has shown rapid growth. In 2022, the forecast number of online sports bettors in the country was 19 million. By 2023, this figure was forecasted to reach 23.1 million.
The global online gambling market is projected to hit $153.57 billion by 2030, exhibiting an 11.7% CAGR over the next seven years. Moreover, propelled by the increased demand for online gambling, the global casino market is projected to grow at a CAGR of 2%, reaching $163.71 billion by 2027.
Keeping all the above factors in mind, let us delve deeper into the fundamental of the featured stocks:
Boyd Gaming Corporation (BYD)
BYD operates as a multi-jurisdictional gaming company. It operates through three segments: Las Vegas Locals; Downtown Las Vegas; and Midwest & South. The company also engages in owning and operating a travel agency.
On April 15, BYD paid its shareholders a quarterly dividend of $0.16 per share, up from the prior quarterly dividend of $0.15.
The company’s annual dividend translates to a 0.91% yield on its prevailing prices, while its four-year average dividend yield is 0.54%. Its dividend payouts have grown at CAGRs of 54.2% and 30.9% over the past three and five years, respectively.
For the fiscal first quarter, which ended on March 31, 2023, BYD’s total revenues increased 11.9% year-over-year to $963.97 million. The company’s net income amounted to $199.73 million and $1.93 per share, up 22.6% and 33.1% from the prior-year quarter, respectively. Also, its adjusted EBITDA improved 8.9% from the year-ago value to $340.32 million.
Street expects BYD’s EPS for the second quarter (ended June 30, 2023) to increase 13.1% year-over-year to $1.67. Its revenue for the same period is expected to improve marginally year-over-year to $911.12 million. Additionally, the company surpassed the EPS and revenue estimates in each of the trailing four quarters, which is excellent.
Over the past three years, its revenue and EBIT have grown at CAGRs of 4.8% and 38.6%, respectively. Likewise, its EBITDA and Levered FCF have improved at 24.9% and 42.1% CAGRs over the same period.
BYD’s shares have gained 42.8% over the past year to close the last trading session at $69.98. Also, it is trading higher than its 50-day moving average of $67.88 and 200-day moving average of $61.47, indicating an uptrend.
BYD’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Value and Momentum. In the 27-stock Entertainment - Casinos/Gambling industry, it is ranked #4. Click here to see BYD’s ratings for Growth, Stability, and Sentiment.
International Game Technology PLC (IGT)
Headquartered in London, the United Kingdom, IGT operates and provides an integrated portfolio of gaming technology products and services, including online and instant lottery systems, iLottery, instant ticket printing, electronic gaming machines, iGaming, sports betting, etc. It operates in three segments: Global Lottery; Global Gaming; and Digital & Betting.
On June 29, IGT announced that its subsidiary, IGT Global Services Limited, had entered into a cross-licensing agreement with FDJ Gaming Solutions France, a subsidiary of FDJ Group known for providing B2B betting services, distribution services, and interactive services for the gaming industry.
Through this agreement, both companies will gain access to each other’s comprehensive range of eInstant games. This collaboration aims to maximize growth opportunities for their respective lottery customers.
In the same month, IGT partnered with Dreamscape Companies to offer its award-winning IGT ADVANTAGE casino management system to the Rio Hotel & Casino, commencing in the fourth quarter of this year. Besides implementing the IGT ADVANTAGE system, the Rio Hotel & Casino will utilize IGT’s M5 content delivery solution to operate bonuses such as Random Riches™ and Lucky Coin™.
Commenting on this, Kevin Sweet, Chief Gaming Officer at Rio Hotel & Casino, said, “IGT ADVANTAGE with the M5 solution and various bonusing and service apps will play integral roles in Rio Hotel & Casino’s capacity to deliver remarkable player experiences and advance our gaming floor and loyalty program.”
In the first quarter that ended on March 31, 2023, IGT’s total revenue increased marginally year-over-year to $1.06 billion, while its adjusted EBITDA rose 3.7% from the year-ago value to $449 million.
During the same period, the company’s net income and EPS amounted to $67 million and $0.11, respectively. In addition, its cash and cash equivalents stood at $669 million, increasing 13.4% compared to $590 million as of December 31, 2022.
The consensus EPS estimate of $0.47 for the third quarter (ending September 30, 2023) reflects a 9.1% increase year-over-year. The consensus revenue estimate for the current quarter is expected to be $1.04 billion. Moreover, the company surpassed the revenue and EPS estimates in three of the trailing four quarters, which is impressive.
IGT’s revenue and EBIT have grown at CAGRs of 4.6% and 24.9% over the past three years, respectively, while its levered FCF has improved at a 26.2% CAGR over the same period.
Over the past nine months, the stock has gained 87.4% to close the last trading session at $31.77, higher than its 50-day moving average of $28.40 and 200-day moving average of $24.87.
IGT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Momentum, and Quality. Within the same industry, it is ranked first. Click here to see the other ratings of IGT for Stability and Sentiment.
Monarch Casino & Resort, Inc. (MCRI)
MCRI owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada, and the Monarch Casino Resort Spa Black Hawk, a hotel and casino in Black Hawk, Colorado.
On March 15, MCRI paid its shareholders a one-time dividend of $5 per share. Additionally, starting in the second quarter of 2023, the board of directors approved the payment of an annual dividend of $1.20 per outstanding share of common stock, payable in quarterly amounts on the 15th day of the third month of each applicable calendar quarter.
This reflects the company’s strong cash flows and ability to boost shareholder returns. MCRI’s annual dividend translates to a 1.71% yield on its prevailing prices, while its four-year average dividend yield is 0.66%.
MCRI’s net revenues for the fiscal first quarter (ended March 31, 2023) increased 7.7% year-over-year to $116.64 million, while its income from operations rose 8.5% from the year-ago value to $23.16 million. The company’s net income and EPS amounted to $17.67 million and $0.90 for the same period, respectively. Also, its adjusted EBITDA improved 6.2% from the year-ago value to $36.48 million.
Analysts expect MCRI’s revenue and EPS for the second quarter (ended June 30, 2023) to increase 7.5% and 18.3% year-over-year to $123.87 million and $1.17, respectively.
Additionally, its revenue and EBIT have grown at CAGRs of 26.3% and 52.4% over the past three years, respectively. Likewise, its EBITDA and net income have improved at 49.6% and 48.1% CAGRs over the same period.
The stock has gained 35.7% over the past year to close the last trading session at $70.35, higher than its 50-day moving average of $68.29.
It’s no surprise that MCRI has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Momentum and Sentiment. Out of 27 stocks in the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have MCRI’s ratings for Growth, Value, and Stability. Get all MCRI ratings here.
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BYD shares were trading at $70.00 per share on Wednesday afternoon, up $0.02 (+0.03%). Year-to-date, BYD has gained 29.02%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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