Casino Stocks Show Signs of Recovery and Potential Growth
Casino and gaming stocks have rebounded significantly from their December lows, signaling the possibility of new upward trends in the near future.
After a challenging 2018, casino and gaming stocks appear to have found a bottom, attracting renewed investor interest in both Macau-focused and domestic operators. Despite the strong price rally since December, opportunities for low-risk entry remain limited, suggesting that investors should wait for more favorable market cycles before increasing exposure. Nevertheless, now is an opportune moment to analyze the sector and identify stocks with the highest profit potential.
Currently, smaller domestic casino stocks seem to offer more promising investment prospects compared to established blue-chip companies. However, notable exceptions exist, such as Las Vegas Sands Corp. (LVS), a major player in Macau, which is completing a potential triple bottom reversal pattern. Additionally, several regional casinos and betting venues have exhibited bullish technical formations, increasing the likelihood of breaking resistance levels and reaching new highs in 2019.
Las Vegas Sands experienced a rapid recovery following the 2008 financial crisis, climbing from a historic low of $1.38 to a peak of $88.28 in 2014. The stock then corrected to mid-$30 levels in 2015, establishing a trading range that has held steady for three years. After a gradual rebound, LVS approached resistance near $80 in mid-2018 before pulling back.
The subsequent sell-off in October halted after surpassing the 61.8% Fibonacci retracement of the 2016-2018 uptrend, resulting in multiple oscillations around this key level through year-end. The current short-term pattern resembles a triple bottom, despite lower lows, with confirmation of a reversal contingent on a rally above the 50- and 200-day exponential moving averages. Achieving this could set a target price in the $70 range.
Eldorado Resorts, Inc. (ERI), which operates hotels and casinos across multiple states including Ohio, Louisiana, and Nevada, holds a market cap of approximately $3.32 billion. The stock broke through 14 years of resistance in 2014, surging to an all-time high near $50 in October 2018 before experiencing a sharp 35% decline within a month.
Following a rebound that faltered above $45, ERI retraced deeply, successfully testing its October low by year-end. The stock has since climbed close to its recovery peak and entered a week-long consolidation phase, suggesting the formation of a double bottom reversal. This bullish pattern could mark the end of the correction and set the stage for a challenge of the 2018 high.
Empire Resorts, Inc. (NYNY) operates a casino resort in New York State, as well as simulcast facilities and the Monticello Raceway. With a market capitalization of about $489 million, the stock has struggled over the years, undergoing two reverse splits while maintaining support near $6.00. In October 2018, it dipped to this level for the first time since 2011 before rebounding over 100%, only to stall at the 200-day EMA resistance in late November.
A decline in December concluded after filling a mid-November gap above the 50-day EMA, and the subsequent rally in January has prompted a second test of the 200-day EMA. A decisive move above $17 could trigger increased buying interest, potentially driving the stock toward the mid-$20s. Investors should note the stock's low trading volume, averaging just 15,000 shares daily, which results in wider bid-ask spreads and greater volatility.
The Bottom Line
Casino and gaming stocks have rebounded from significant lows and may be establishing a base for future gains. However, given recent substantial price increases, investors should exercise caution and seek low-risk entry points before committing capital.
Disclosure: The author did not hold positions in any mentioned securities at the time of publication.
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