Las Vegas Operations Aid Boyd Gaming (BYD), High Costs Ail

Boyd Gaming Corporation BYD is likely to benefit from Las Vegas operations, interactive gaming platform and FanDuel partnership. This and focus on strengthening current operations (through capital investment and other strategic measures) bode well. However, inflationary pressures are a concern.

Let’s delve deeper.

Factors Driving Growth

Boyd Gaming considers the local market in Las Vegas as a major driver for its portfolios. With restaurants and bars open, frequent visitations by locals are likely to drive growth for the company. During second-quarter 2022, revenues in the Las Vegas Locals segment amounted to $236.5 million compared with $236.1 million reported in the prior-year quarter. An increase in Hawaiian visitation and return of destination travel added to the upside. The company emphasized on streamlining cost structure to drive growth in the upcoming periods.

Since the coronavirus outbreak, Boyd Gaming has been witnessing a solid performance by its interactive gaming platform. Thanks to its strategic partnership with FanDuel, the company is optimistic regarding its future in the iGaming industry. The company is focused on online gaming prospects in Kansas and Ohio. It anticipates launching FanDuel retail and mobile sportsbooks in the state by 2022-end, subject to regulatory approvals. Given the growth opportunities related to the expansion in new markets and digital opportunities in online casino gaming, the company anticipates EBITDAR (from its online operations) to exceed $30 million in 2022.

Boyd Gaming focuses on expanding its portfolio by strengthening current operations and growing through capital investment and other strategic measures. The company extensively depends on acquisitions as a strategy to expand its brand presence. In July 2022, the company initiated work on developing a land-based facility at Treasure Chest. Also, it reported progress with respect to the expansion of the Fremont Hotel and Casino and the Sky River Casino site. The projects include enhancements of gaming and non-gaming amenities, including expanding Casino space and the addition of appealing quick-serve restaurants. The company remains optimistic and anticipates the initiatives to boost its customer base and traffic in the upcoming periods.

Concerns

Boyd Gaming has been grappling with higher expenses across gaming, food and beverage, room, and other offerings. Total operating costs and expenses in second-quarter 2022 increased 3.5% year over year to $649.4 million. The downside was primarily driven by inflationary pressures related to supply chain issues, higher gas prices and utility costs. For 2022, the company anticipates operating expenses to remain elevated owing to a rise in minimum wage rates and utility costs.

Boyd Gaming — which shares space MGM Resorts International MGM, Las Vegas Sands Corp. LVS and PENN Entertainment, Inc. PENN in the Zacks Gaming industry — has been affected by the coronavirus crisis. Although most of the properties have reopened, potential resurgences or new virus variants might hurt the company in the upcoming periods. Since the pandemic’s severity, duration and impact cannot be ascertained, the possibility of additional business disruptions, lower customer traffic and reduced operations cannot be ruled out.

A Brief Review of the Other Stocks

MGM Resorts is benefiting from pent-up consumer demand and strong international leisure trends. During the second quarter of 2022, the company benefited from strong leisure demand and better convention business in the Las Vegas market. During the quarter, net revenues from Las Vegas Strip Resorts were $2,137.2 million, up 112.7% year over year. Increased business volume and travel activity (on a year-over-year basis), coupled with the inclusion of The Cosmopolitan and Aria, added to the upside. Going forward, the company remains bullish on its domestic business outlook. Much optimism can be noted owing to attributes such as a rebound in convention business, increased international flight capacity and a robust event calendar.

Las Vegas Sands is benefitting from an accelerated recovery in its Singapore business, relaxation of pandemic-related restrictions and a strong business model. Also, emphasis on development projects bodes well. The company regularly evaluates opportunities to improve its product offerings and other revenue-generating additions to its Integrated Resorts. Some notable investments include The Londoner Macao development project and The Grand Suites at Four Seasons. The company is optimistic in this regard. It anticipates the projects to boost its strategic position and competitiveness across multiple segments, enabling growth in its retail business and meetings, incentive, convention and exhibitions (MICE) space.

Penn National is benefiting from strong property level performance across all the segments, courtesy of its omni-channel strength, technological investments and improvement in marketing capabilities. The company also revealed that it is benefiting from retail Barstool Sportsbook, which continues to stimulate database growth and increases the frequency of visitation in the younger segments. The company is confident about its long-term growth that will be supported by a differentiated omnichannel approach. Also, it stated plans to launch Barstool Sportsbook in Kansas, Ohio and Massachusetts.

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