Inventory weak spot defies ‘constant and stable’ gaming tendencies, Truist analyst says — CDC Gaming

Gaming shares have carried out weakly thus far into 2026, stated Truist Securities analyst Barry Jonas in a February 3 investor word.

The shares’ debility was, continued Jonas, in defiance of “consistent and solid” on line casino tendencies — outdoors of Las Vegas. He anticipated digital-gambling outcomes to be sturdy and regional revenues to be in step with expectations.

Jonas’s most favored identify in playing, looking forward to fourth-quarter earnings from 2025, was DraftKings. He additionally favored such “quality names” as Churchill Downs, Sportradar, Genius Sports, Gaming & Leisure Properties, and Vici Properties.

The analyst’s choice for DraftKings was predicated on extra favorable maintain percentages on NFL play in late 2025. His numbers confirmed deal with up 10 p.c, however income taking pictures 40 p.c greater than within the fourth quarter of 2024. So Jonas ratcheted up his cash-flow projection for DraftKings from $223 million to $325 million. Wall Street’s consensus for the corporate had been round $255 million.

Also anticipated to learn was FanDuel mother or father Flutter Entertainment. Jonas moved his fourth-quarter cash-flow projection from $323 million (in step with Wall Street sentiment) as much as $340 million. He additionally nudged his cash-flow forecast for Flutter’s worldwide operations to $919 million from $902 million. The Wall Street quarterly projection was for $898 million.

“Still, the stocks will likely react more so to each’s respective 2026 guidance, on top of wider commentary on prediction markets,” Jonas cautioned. His 2026 cash-flow forecasts for DraftKings and Flutter remained the identical: $940 million for the previous and $3.7 billion for the latter.

Looking at this time yr, Jonas reported that in New York state, NFL deal with was down three p.c, however winnings had been up six p.c with a maintain share 10.2 factors. Despite two weeks of weak sub-seven p.c maintain within the Empire State, the week ending January 18 skilled a maintain of 17.6 p.c, leading to books profitable $96 million off $545 million wagered.

“We believe that weaker handle growth in New York January [online sports betting] data has spooked investors into thinking prediction market cannibalization is more prevalent and widespread than it may actually be,” Jonas ventured. He advised different elements, resembling sharp bettors, VIP play or robust comparisons on faculty soccer wagering.

New York, Jonas continued, “represents a higher mix of prediction market players staking higher than average amounts. We think more data over a wider timeframe is needed to suggest the OSB industry is in some form of structural decline, driven by prediction markets. We would highly doubt any earnings commentary will suggest a meaningful impact from prediction markets just yet.”

Even so, prediction markets had been nonetheless the most well liked matter in playing, in line with Jonas. Interactive-gaming shares had been, he stated, weighed down by potential publicity to occasion contracts. Also, 89 p.c of Kalshi revenues had been coming from sports activities wagering, accelerating as NFL play heated up.

That stated, many of the prediction markets, Jonas argued, had been devouring sports activities betting in like-for-like markets, with many of the cannibalization occurring in California and Texas. Also affected with states with numerous sharps (resembling New York) and because of college-age bettors collegiate soccer.

“With sports betting about to enter a seasonally slower period, we will look closely at prediction market trends,” Jonas wrote. “Additionally, with several state level court cases around sport prediction markets due for an update, potential legislative actions in the mix and a new CFTC chairman looking to flex his authority, there could be wider implications for the sports prediction [marketplace].”

Per Jonas’s information, prediction-market charges are modest in comparison with the playing trade. Kalshi’s 2025 charges whole $263.5 million. The analyst set that quantity towards the Las Vegas Strip ($16 billion), regional United States casinos ($45 billion), $15 billion from conventional OSB, and $10 billion from igaming.

On the topic of conventional casinos, Jonas stated that smooth room charges on the Las Vegas Strip within the final quarter of 2025 had been hardening into early 2026 flatness. Although the ConAgg expo in March has pushed room charges 9 p.c greater, with out ConAgg they’re 5 p.c down for March and 4 p.c off within the first quarter general.

Weekly comparisons are trying higher in February and March, Jonas penned, however “we have not yet seen enough to think that the strong convention season will be able to more than offset the leisure weakness,” and leisure commerce represents 80 p.c of room nights. Despite much less opposed declines, Jonas continued to anticipate room-rate softness to persist all through the primary quarter. Growth was seen as doable, even doubtless, within the second quarter and past.

Jonas’s Strip estimates remained unchanged for MGM Resorts International and Caesars Entertainment. Regarding MGM, the stasis “was more a reflection of expectations having reset lower sooner for [Caesars], which also could benefit more from regional upside than the Strip-centric MGM.”

A brighter spot had been Las Vegas locals casinos, whose revenues had been 4 p.c up in 2025’s final trimester. “All this should translate to mostly inline quarters for our regional coverage, though we could see some modest upside in the Regionals,” Jonas penned, noting Caesars, Churchill Downs and Boyd Gaming as doubtless beneficiaries.

Jonas didn’t search for favorable comparisons in 2026’s first quarter. True, the earlier yr had seen adversity within the type of harsh climate and (unspecified) terrorist assaults. However, in 2026, “January weather has been very unfavorable so far (at least in the Northeast region) with February not off to a great start either.”