In an investor update dated January 23, J.P. Morgan provided a cautious outlook on the global gaming industry as it approaches fourth-quarter earnings. Analyst Daniel Politzer pointed out that ongoing operational and market challenges are impacting investor confidence.
According to Politzer, gaming stocks are currently burdened with significant negative sentiment, with Las Vegas Sands and DraftKings being the only two stocks he recommends ahead of the earnings announcements.
He indicated that the digital gambling sector stands the best chance of exceeding forecasts, although it too faces risks from policy shifts and market volatility.
He mentioned that these stocks are saddled with investor worries regarding handle growth, prediction markets, and regulatory/tax risks as legislatures are in session. Politzer noted that the mood around digital wagering is unstable, with growth rates slowing and regulatory signs changing.
Operators exposed to Macau are also projected to navigate a challenging landscape. Politzer highlighted rising operator expenditures related to diversification efforts within China’s gaming sector, along with concerns about second-half revenue performance in 2025.
Macau’s gaming revenue experienced a 15% increase in the latest quarter, reaching 92% of the 2019 figures, but growth was not consistent. Meanwhile, VIP and high-end play surged by 45%, whereas mass-market growth lingered in the mid-single digits.
Given this scenario, Politzer forecasts that Las Vegas Sands’ cash flow from Macau will be $626 million for Q4 2025, aligning with expectations, while a 6% increase is anticipated for Singapore’s cash flow, expected to hit $723 million.
He posited that Macau’s future improvement heavily relies on successful execution, while Singapore is set to “boost” future cash-flow expectations. In contrast, he estimates that MGM China will report Macanese cash flows of $292 million and Wynn Resorts $281 million, both significantly lower than Sands’ forecast.
Politzer advises caution despite the promising start to January. “Although January has kicked off positively, there’s likely limited insight to glean from it,” he remarked, emphasizing that the timing of the Chinese New Year in mid-February complicates early trend assessments. He cautioned that earnings comparisons will become increasingly difficult in the latter half of 2026.
On the Las Vegas Strip, expectations appear low, with investors questioning the recent downturn in leisure demand. He framed the concern around whether the decline is “structural or cyclical,” adding that even a cyclical contraction breeds uncertainty about when the next growth phase may begin.
Meaningful recovery isn’t anticipated until after the easier comparisons of Q3 2026. For Q1, he predicts revenue declines of 6% for MGM Resorts International and 1% for Caesars Entertainment, while Wynn is expected to remain flat. The second quarter is projected to stabilize, with anticipated growth of 2-3% in Q4 2026.
In the realm of digital wagering, Politzer mentioned that the rollout of sports betting in Missouri is likely to contribute to a 9% handle growth for the quarter, a deceleration compared to earlier months. October saw a 15% handle growth, November 10%, followed by a 3% contraction in December.
He forecasts an 11% handle growth for DraftKings, while FanDuel is expected to fall short of that figure, partially due to substantial promotional efforts. “There is some good news: hold rates have mostly returned to normal,” he noted after a poor fourth quarter for sportsbooks.
Politzer reaffirmed a positive outlook for DraftKings, projecting $300 million in cash flow, estimated at 20% above Wall Street expectations. On the other hand, he indicated that Wynn, impacted by fluctuating hold in Macau, and Penn Entertainment may fall short of earnings forecasts.
The note concluded with several price target adjustments. Politzer lowered his target for Caesars to $37 per share and DraftKings to $41, while reducing Wynn’s by $2 to $143. Conversely, he raised the targets for Churchill Downs to $131, Las Vegas Sands to $71, and Station Casinos to $20, while cutting Sportradar’s by $5 to $30.