FANTINI ’ S FINANCE
Focusing on Growth
Putting the bad taste of 2024 aside means investing in growth companies
BY FRANK FANTINI
As we are now into the start of 2025 , here ’ s a thought for last year : Thank goodness 2024 is over .
While the stock market ’ s major indices all advanced double digits for the second straight year , gaming stocks generally declined .
At least that ’ s the commonly held view . After all , the stocks of industry giants Wynn , Caesars and MGM all fell . Revenues of brick-and-mortar casinos were flat to down in most U . S . markets , and even those that grew did so because of new properties and expansions , while surrounding properties suffered declines .
The dip of regional casino revenues was especially felt in jurisdictions with big online gaming industries like New Jersey and Pennsylvania . Even the hot market of Macau saw stock prices mostly flattish and still well below the peaks of a decade ago .
There were exceptions . Among U . S . regional operators , Boyd , Monarch Casino and Churchill Downs bucked the trend with rising stocks . Suppliers did well , in part because of pending buyouts like Everi and AGS , and in part because companies that we might call Aussie-American , namely Aristocrat and Light & Wonder , just keep hitting home runs in products and operationally .
But upon closer review , as the NFL refs say , a considerable number of stocks rose , and all of these had one thing in common — growing revenues . Some of them , such as Boyd , Monarch and Churchill Downs , had well executed oldfashioned selective growth projects . ( Though one wonders how investors missed out on Red Rock Resorts in that department .)
Others belonged to that brave new world — digital gaming .
Indeed , many digital gamers had bang-up years . Among operators , Flutter jumped 24 percent , DraftKings soared 148 percent and Rush Street Interactive went intergalactic with a 163 percent rise .
The good news also came from associated digital companies such as affiliate Gambling . com , up 54 percent , and data providers Genius Sports and Sportradar , up 29 and 68 percent , respectively .
Again , what all of these companies from brickand-mortar to digital have in common is growth , and prospects of further growth in the underlying businesses . In recent years , a common argument against high-flying digital companies has been that they were spending away their otherwise bright futures in a self-destructive race to outspend competitors to grab market share .
Many digital gamers had bang-up years . Among operators , Flutter jumped 24 percent , DraftKings soared 148 percent and Rush Street Interactive went intergalactic with a 163 percent rise .
But the market has been settling out as money-losers leave the scene and surviving incumbents begin bringing revenues to the bottom line .
There are still risks in the sector . Companies in new jurisdictions will again go through the nowfamiliar money-losing fights for market share , and the threat of stringent government regulations being imposed in existing markets looms even larger . But the opportunities — think Brazil as well as the U . S ., and other new international nations — are enormous , and those companies now developing into winners are likely to be among the big front-runners long term . In other words , the likes of DraftKings , Flutter and Rush Street might just be at the start of their growth .
One group that hasn ’ t fared well among investors so far is the land based-digital hybrids , of which Caesars and Penn Entertainment are the biggest and best known .
However , investors might do well to consider whether the depressed prices of their stocks are buying opportunities . First of all , their brick-andmortar operations aren ’ t going away , and they themselves are arguably worth more than today ’ s stock prices . In the case of Caesars , CEO Tom Reeg has made it clear the company is pursuing profits in digital , not market share alone . He remains adamant that online will produce $ 500 million-plus in EBITDA annually .
For Penn Entertainment , this is the year it is prepared to fully capitalize on its ESPN alliance . If successful , the future stock price will be multiples of today ’ s minus- $ 20 a share .
There is some debate on whether gaming stocks should rebound , if only because they have become so cheap with valuations even below those of an industry that usually carries low ones . But to use an old expression , cheap is not necessarily the same thing as inexpensive . Sometimes stocks are cheap for a reason .
Our preference is what might be called true value . That is , stocks that grow profits and returns to investors based on growth in their businesses . In other words , the boasts of CEOs and CFOs of high profit margins ring hollow if their financial results are based on cost cutting while the underlying business is shrinking or stagnant .
That brings us to two of our favorites , the gaming REITs VICI Properties and Gaming & Leisure Properties . The stocks are hardly barnburners . But add in their dividends , and VICI returned 8.7 percent to shareholders last year and Gaming & Leisure 19.5 percent . That ’ s not bad , especially considering their rock-solid and rising leases and their ability to help themselves grow by helping finance the growth of their tenants .
In summary , there are still plenty of investment opportunities in gaming companies , and the key is the same as it always has been and always will be for stock investors — growth .
Frank Fantini is principal at Fantini Advisors , investors and consultants with a focus on gaming .
12 Global Gaming Business FEBRUARY 2025