Las Vegas Casino Investors Did Not Have A Great 2018

Investors who placed their hopes in Las Vegas casino operators to win big in 2018 were disappointed at the end of the year. Though a lot of shares finished higher as the year ended, many big gaming companies were down 30 percent compared to their initial performance at the beginning of 2018. This was the worst annual performance for Las Vegas gambling operators in a decade.

The losses came as a surprise. When the year started, things were going well especially after the new corporate and personal income tax cuts became law. These tax cuts generated a lot of gains for Las Vegas casino operators as people started spending their cash and investing in these gambling powerhouses.

The increased spending was a good sign for casinos as more spending meant more revenue for Las Vegas convention centres and casino floors. However, this did not turn out to be the case as things changed rather quickly.

In July, trade talks stalled and President Donald Trump decided to impose $34 billion worth of tariffs on Chinese goods. This caused China to retaliate and sparked a trade war. The tensions seem to have spooked the high-rollers in Macau. This was reflected in the slowed revenue growth in the region, which started out at 22 percent at the start of the year and dropped down to nine percent by mid-year.

The drop in Macau earnings hurt Wynn Resorts and Las Vegas Sands, both of whom get half of their revenue from their Macau locations. Wynn share prices are now down 41 percent and Sands shares are down 22 percent.

Las Vegas Problems

Other casino operators faced problems closer to home. This was felt in the lower earnings for Las Vegas casino operators during the third quarter. Both Caesars Entertainment Corp and MGM Resorts made the announcement in August which resulted in a dumping of shares that dragged down share prices further.

It also didn’t help that the Trump tax cuts which boosted the economy early in the year pushed the Federal Reserve to hike rates four times last year. This sparked fears that a recession was on the way and once again resulted in a drop of share prices for casino operators.   

Scientific Games borrowed a lot of money to proceed with their expansion and development plans and Caesars also followed a similar approach. Scientific Games shares dropped 65 percent in 2018, while Caesars’ shares are now 46 percent lower in value.

However, investors are not giving up on gaming stocks. Experts already predict that 2019 will see a resurgence of gaming investment.