Jefferies Analyst Bullish on Slots Despite Transitory Casino Slowdown

Jefferies Equity Research has suggested that demand for slot machines remains strong despite regional fluctuations in gambling revenues. The organization suggested slot machine revenue will likely continue to increase in the wake of a somewhat slow February.

The Analyst Believes the Slowdown Is Only Temporary

Kai Erman, a Jefferies Equity Research analyst, weighed in on the matter, addressing the general forecasts that US consumer discretionary spending will weaken. Despite this projection, he was firm that the demand for slots is still strong.

In an investor note published on April 30, Erman suggested that regional declines in gambling revenues have been mostly offset by key markets, such as Nevada. In addition to that, he asserted that the casino revenues in March should be much stronger than the unimpressive results reported in February.

Erman attributed the weaker February figures to the hype surrounding the Super Bowl, the fact that it didn’t take place in Las Vegas and generally bad weather that dissuaded casino goers from visiting gaming halls.  

Slots Remain Dominant

Some of the casino results in March were still suboptimal, with receipts decreasing 4%. However, Erman noted that slot machine receipts in particular experienced an increase of 4.5%. Erman added the favorable trend was reflected in statements by Caesars Entertainment and Boyd Gaming, which suggested strong visitation and stable spending.

The analyst reasserted that market demand remains strong and suggested that the lack of meaningful competition remains a “major volume tailwind.” He added that there is an upside to both valuation and consensus estimates, since investors are becoming more used to the demand for land-based gaming in the United States.

Erman concluded that slot machines remain the leading gambling vertical, far outperforming other gaming products, such as table games, poker and betting. Because of that, Erman remained optimistic about the performance of slot providers, such as Light & Wonder and Aristocrat, dismissing investor concerns and recession-related fears.

Casinos to Rebound

Erman’s statement comes a week after the analyst called March and April “transitory weaknesses” for the gaming sector. In an earlier note, he echoed many of the points outlined in his latest one, attributing the temporary decline to a variety of factors.

Among other things, he mentioned the intense competition from the iGaming sector, which has hurt land-based casinos in markets where iGaming is legal.

However, Erman was firm that US gaming is in for rebounding as there is enough data to suggest that the recent decline isn’t permanent.