Bank of America downgrades Caesars, Penn Entertainment on fallen demand

Yahoo Finance Live checks out Bank of America's recent stock downgrades in the sports betting space.

Video Transcript

JOSH SCHAFER: Now my play today is two gambling names, Caesars and Penn Entertainment. Bank of America downgrading both those names from buy to neutral, citing diminishing in the softening consumer demand, flattening gross gaming revenue, and declining visitation.

Now take a look at this guys. Penn's visitation this year specifically had grown 10% and 28% in January and February earlier this year. Now that's turned negative. Those numbers have declined in both October and November to about negative 6%, negative 4% year over year. So less people visiting those casinos now this year at this time, Dave, than they were last year.

And I want to point to this chart right here that Bank of America also pointed out. So this is aggregated credit and debit card spending. You see those spikes at the beginning of the year. People were spending a lot. Now, look. We've turned negative in the purple and blue categories that are discretionary and total card spend for the first time this year. So Bank of America is sort of wondering if discretionary spending is coming down, is that going to go down in gaming, and I think maybe some other sectors, too, right, Dave?

DAVE BRIGGS: I was shocked to see that graphic. I thought it'd be remarkably consistent throughout this year. And the real question here is, is gambling recession proof? And I put that question to Jason Guyot, who's the CEO of Foxwoods Casino CEO, just a couple of months ago. And he said, absolutely not. Gambling is not recession proof, which shocked me, that type of admission. I would agree. I think the only thing that has proven recession proof is really the lottery in terms of gambling. So, yes, I think this trend will continue, as you see people cutting back on gambling in the near future.

SEANA SMITH: Yeah, certainly, and I think, obviously, with the Fed continuing to raise hikes, remaining-- raise rates, remaining very committed to getting inflation under control, that's going to be a lot of pain for millions of Americans. They're going to be forced to pull back on spending. And I think a lot of them, even though if they don't want to pull back on their gambling spending, they're going to have to.

DAVE BRIGGS: Have to.