Gaming and lodging stocks took a big hit on Friday following news of the new omicron variant of COVID-19. Despite that, Bank of America analyst Shaun Kelley said Monday there are plenty of gaming and lodging stocks to buy on the dip heading into 2022.
Gaming Picks: In the casino space, Kelley is still expecting Las Vegas revenues to grow more than 20% in 2022, while regional U.S. casino revenue will rise in the mid-single digits. Kelley said Macau remains a “black box” for investors with significant recovery potential and real risks from COVID-19, concession renewals and an ongoing regulatory crackdown that resulted in 10 junket operator arrests last week.
Among casino stocks, Kelley named Boyd Gaming Corporation BYD his top value stock pick, Churchill Downs, Inc. CHDN his top organic growth stock pick, Caesars Entertainment Inc CZR his best-of-breed stock pick and VICI Properties Inc VICI his top stock pick for yield investors.
Kelley is projecting online gaming revenue will grow 41% in 2022, driven by expansion into new states, including New York.
“Encouragingly, we raised our near-term TAM twice in 2021, as productivity (win per adult) is exceeding expectations,” Kelley said.
Kelley named Sportradar Group AG SRAD his top “pick and shovel” stock for broad exposure to the online gambling space, Caesars his top stock pick for online market share gains and Penn National Gaming, Inc PENN his top value stock pick.
Lodging Picks: Finally, Bank of America is expecting lodging RevPAR to fully recover to 2019 levels in 2022, gaining 15% year-over-year. The firm’s top stock picks in the space include Hilton Hotels Corporation HLT, Marriott International Inc MAR, Wyndham Hotels & Resorts Inc WH, Choice Hotels International Inc CHH, Ryman Hospitality Properties Inc RHP, Pebblebrook Hotel Trust PEB and Apple Hospitality REIT Inc APLE.
Benzinga’s Take: The 2022 outlook for gaming and lodging stocks was a lot clearer a week ago before the discovery of the new COVID-19 variant. The next couple of weeks could be critical as investors get more information on the deadliness of the new variant and the efficacy of existing vaccines against it.
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