The gaming sector, often marked by its cyclical highs and lows, might see a more favorable turn in 2025. According to Chad Beynon, a gaming analyst at Macquarie Group, online gaming and Macau-centric stocks are set to outperform, while Las Vegas casino operators appear less promising. Beynon’s predictions paint a mixed but optimistic picture for the industry after a challenging 2024.
A Tough Year for Gaming Stocks in 2024
Gaming stocks underwhelmed in 2024, with a median decline of 2% and an average gain of just 4%. These figures pale in comparison to broader market indices like the S&P 500 (+23%) and the Russell 2000 (+11%). Beynon highlighted that other leisure sectors, including hotels, airlines, and cruise lines, also outperformed gaming for the second consecutive year and in six of the last eight years.
Beynon noted an interesting historical pattern. “Gaming stocks outperformed indices during the first year of Donald Trump’s presidency in 2017 and again in 2019, his third year in office,” he said. However, the sector lagged during the last four years and saw a significant dip in 2020 due to pandemic-related closures. Despite these struggles, Beynon suggests that gaming could experience “positive estimate revisions and valuation re-ratings” in 2025.
Digital and Macau Lead the Pack
The analyst emphasized that the gaming sector would likely see winners and losers across its subcategories. His preferred order of investment includes digital gaming, Macau-centric stocks, gaming suppliers, Las Vegas casinos, and regional casinos.
Online Gaming: Growth Slows but Stabilizes
Online gaming and sports betting remain at the top of the list. While the sector enjoyed staggering growth of 40% to 70% annually over the past three years, 2025 is expected to see a more tempered pace of 25%. Beynon pointed out that several companies are now achieving the “Rule of 40,” a benchmark that combines growth rate and profit margin to attract investor interest.
“Even with negligible legislative advancements, we anticipate six new bills being introduced in the coming months,” Beynon said. Although slower legislative activity may curb growth, it could improve profitability through operational efficiency.
Macau: Rebounding Despite Challenges
Macau’s recovery has been slower than expected, with 2024 gaming revenue up 24% year-over-year but still down 23% compared to 2019. Stocks tied to Macau underperformed, with a 5% decline in 2024. Despite these setbacks, Beynon is optimistic about 2025.
“China values Macau and continues to support it as a destination,” he said. The Chinese New Year could serve as a turning point for Macau’s gaming revenue. Beynon also highlighted that EBITDA surprises and valuation multiples—currently around 8x 2025 estimates—make Macau-centric stocks like Wynn Resorts and Las Vegas Sands particularly attractive.
Las Vegas and Regional Casinos: A Mixed Outlook
While Las Vegas casinos remain a critical part of the gaming ecosystem, Beynon views them as less appealing investments in 2025. He cited weaker consumer spending and limited opportunities for growth. Regional casinos, trading at 7.3 times enterprise value to EBITDA, could see a re-rating, especially with improved performance in the first quarter.
Beynon’s analysis identified specific winners across market caps:
- Large-Cap Picks: DraftKings, Flutter, Wynn Resorts, Light & Wonder
- Small- and Mid-Cap Picks: Red Rock Resorts, Golden Entertainment, Gambling.com Group, Genius Sports, Century Casinos
The Road Ahead for 2025
Investors have reasons to be cautiously optimistic. Macau’s potential rebound, the steady growth of online gaming, and undervalued regional casino stocks could create pockets of opportunity. However, challenges remain, particularly for Las Vegas operators facing a more competitive landscape.
For 2025, Beynon’s research suggests a balanced approach, focusing on segments and regions poised for outperformance. As the year unfolds, gaming stocks will be closely watched to see if they can finally buck the trend and deliver returns that rival broader market indices.