“2025 Vision: Bright Future for Land-Based Gaming with Mergers and Acquisitions on the Rise”

The forecast for the casino sector in 2025 appears optimistic following a tough 2024. Cuts in interest rates and transformations at the Federal Trade Commission could provide enhanced opportunities for mergers and acquisitions.

These insights were part of the principal takeaways concerning gaming during the year-end Truist Securities’ Wicked Good 12th Annual GLLR Summit held in Boston.

Attendees from various companies included Accel Entertainment, Caesars Entertainment, Churchill Downs, DraftKings, Gaming & Leisure Properties, Golden Entertainment, International Gaming Technology, Light & Wonder, Penn Entertainment, and Wynn Resorts.

In a note directed to investors, Truist analyst Barry Jonas expressed that terrestrial trends appear “somewhat more encouraging than the recent investor skepticism would indicate,” with regional sectors rebounding from 2024 lows while Las Vegas remained stagnant against challenging comparisons.

“The expectations for land-based gaming seemed more promising after a more difficult 2024, a year wherein many of our operators’ stocks declined in favor,” Jonas remarked. “Regionals appear poised to recover from this year’s lows, as operators are witnessing some momentum in November and December. While part of this is seasonal, operators have also mentioned a potentially stronger consumer market post-election, reduced fuel prices, and generally improved performance against new competitors (Wind Creek compared to Chicagoland, Nebraska casinos against Council Bluffs).”

Jonas noted that Caesars sounded “incrementally optimistic” since its earnings report in late October, and “we believe their 2025 regional commentary titled ‘slightly down to flat’ EBITDA may actually be closer to ‘flat to slightly up’ if their earnings call were conducted today.”

Nonetheless, Jonas is adjusting the Caesars 2025 regional EBITDA earnings forecast downward, to more accurately reflect guidance and the sale of the LINQ Promenade, predicting EBITDA will increase approximately 0.3% year-over-year.

“We observe that November’s state-reported data is up +4% year-over-year with around 40% of results documented,” Jonas added.

Regarding Las Vegas, operators perceive trends as more stable in comparison to continuing challenging comparisons, Jonas commented. Following several months of year-over-year gaming revenue decreases (Aug. -4%, Sept. -2%, Oct, -3%), F1 contributions were net down year-on-year, though the remainder of November sounded more promising.

“December reports were positive as were January, although February will compare against a notably strong Super Bowl,” Jonas stated. “Overall, management teams expressed confidence in a return to growth in 2025, given a robust events calendar. We have noted that comments surrounding the setup for land-based gaming in 2026 were more favorable than for 2025. In the regions, operators felt positive about overcoming new competition and limited new/improved supply. Simultaneously, Vegas will host the substantial Con/Agg conference, and Caesars will gain from the return of State Farm.”

Operators expressed more optimism regarding mergers and acquisitions, with shifts at the FTC and interest rate cuts potentially providing chances to adjust portfolios and valuations, Jonas mentioned.

“The frequency of discussions has increased since the Fed initiated rate cuts, and further, operators are optimistic about a more favorable FTC administration,” Jonas stated. “After a theorized and actualized year for M&A in gaming technology to adjust valuations, we believe 2025 holds the potential to be the year of gaming operator M&A. That being said, expectations regarding valuations and bid/ask spreads will play crucial roles. Regardless of new M&A activities, GLPI emphasized during meetings its significant built-in growth scheduled for next year.”

Digital continues to expand, with challengers remaining optimistic, while the trends in interactive gaming continue to impress, Jonas remarked. DraftKings “is advancing rapidly” with 2025 anticipated to yield further growth and an increase in free cash flow. While Caesars remains disappointed with the lack of acknowledgment for its digital segment in its valuation, management persistently explores avenues to unlock value, including a potential spin-off of its digital unit.

Elsewhere in the digital realm, Penn is focused on investing and expanding its entire interactive suite, as they are poised to release a standalone igaming app in the first quarter to complement ESPN Bet, Jonas noted.

“We believe that a standalone igaming opportunity could be undervalued, considering Penn’s extensive land-based portfolio,” Jonas added. “We continue to perceive state tax modifications as the largest threat to interactive gaming. Nevertheless, despite the genuine possibility of more tax increase proposals next year, management teams considered the likelihood of these proposals succeeding to be low.”

Representation from tech was reduced following a year of M&A in the sector, although industry leader Light & Wonder stressed a “remarkably successful response to the Dragon Train injunction against a backdrop of consistent growth, despite a stagnant land-based casino replacement environment,” Jonas explained.

“We anticipate that the focus will shift to a 2025 analyst day and what the forthcoming growth targets may entail after achieving the 2025 $1.4 billion EBITDA goal,” Jonas stated.
“IGT remains in more of a wait-and-see stance as we anticipate the Italian Lotto RFP release in the upcoming weeks, though management emphasized overall stability in its portfolio while remaining optimistic regarding the upcoming Mega Millions price increase.”