Las Vegas is struggling to recover from the coronavirus shutdown, but Bank of America analyst Shaun Kelley said Thursday regional U.S. casino operators have a golden opportunity to take advantage of the crisis climate.

“Sports/iGaming and margin expansion are the two most transformative themes in our coverage and Regional Gaming companies are uniquely positioned to enjoy the most upside,” Kelley said.

For investors, Kelley said Penn National Gaming, Inc (NASDAQ:PENN) is the best way to play sports betting and iGaming. Penn and Boyd Gaming Corporation (NYSE:BYD) also have relatively low exposure to the Las Vegas market, which is struggling due to a severe slowdown in air travel and major events.

Expanding Margins: Kelley said margin expansion for regional casinos is being driven by three factors:

• Reduction of lower-margin offerings, such as buffets.
• More efficient marketing budgets.
• Reduced staffing.

For the month of July, gross gaming revenue from reporting states is down roughly 13% year-over-year as pent-up initial reopening demand subsides. Looking ahead, Kelly is projecting third-quarter GGR will decline 25% from a year ago and fourth-quarter GGR will drop 15%.

The postponement of the Big 10 and PAC-12 NCAA football season has generated some negative headlines for DraftKings Inc (NASDAQ:DKNG) and the rest of the sports betting industry. However, Kelley estimates college football accounts for only about 10% of sports betting, and he suspects those gamblers will likely just move to other sports and leagues if the NCAA football season is canceled.

Ratings And Price Targets: Kelley named the following stocks as top picks based on the latest trends in the gaming world:

• Penn National, Buy rating and $50 target.
• Boyd Gaming, Buy rating and $28 target.
• Gaming and Leisure Properties Inc (NASDAQ:GLPI), Buy rating and $37 target.
• VICI Properties Inc (NYSE:VICI), Buy rating and $24 target.
• MGM Growth Properties LLC (NYSE:MGP), Buy rating and $31 target.

Benzinga’s Take: China recently lifted restrictions on travel to and from Macau, and Kelley’s analysis suggests U.S. regional casino operators are thriving. For now, at least, Las Vegas remains the laggard and has the most challenging near-term outlook given the lack of events and conferences in the second half of the year.

Related Links:

2 Reasons To Own DraftKings Despite Risk Related To College Football Hiatus

What The November Election Means For Casino Stocks