Stock Market Slump Jolts the Gambling Industry

The gaming industry was significantly impacted by Monday’s dramatic stock market slump, which saw the Dow Jones Industrial Average drop over 1,000 points, marking the market’s worst day since 2022.  The Dow tumbled 2.6%, while the Nasdaq Composite plunged 576 points—equating to 3.4%. These rapid movements caused significant panic, but the situation looks to be gradually returning to normal.

The Recent Shocks Had a Wide-Ranging Impact

Fears of an impending recession in the US have sent shockwaves across global markets, triggering a massive sell-off that has left investors across Asia, Europe, and North America scrambling to unwind their positions simultaneously. The steep plunge has created fears that investors could be on the verge of being caught in a historic market crash.

The CBOE Volatility Index, Wall Street’s so-called fear gauge, surged above 65, reflecting the ongoing market turbulence. Such levels were last seen during the onset of the COVID-19 pandemic. The index eventually settled, but the spike highlighted the heightened anxiety among investors as the shock from Monday’s dramatic slump keeps reverberating across various markets.

Gambling Has Been a Historically Resilient Sector

Major publicly traded casino operators got hit hard. Gaming giant Caesars Entertainment saw its share price slide 6.9% on the Nasdaq, closing at $33.20. MGM Resorts International’s stock fell almost 4% to close at $34.07 on the New York Stock Exchange. This drop did not coincide with any news related to the gambling sector, so it was likely an aftershock from the broader stock market slump.

Local casino operators also suffered from the market turbulence. Boyd Gaming’s stock plummeted 2% to $54.16 on the New York Exchange. Red Rock Resorts plunged 3.7%, finishing at $49.66 on the Nasdaq. Golden Entertainment, owner of the STRAT, watched its stock slide more than 6%, closing at $27.78 on the Nasdaq.

It wasn’t just casino operators suffering from this downturn. Slot machine developer Light & Wonder’s Nasdaq shares dropped nearly 5%, while International Game Technology slumped 1.3% on the NYSE. Despite these sudden decreases, B. Riley Securities gaming analyst David Bain told SeekingAlpha.com that he remains optimistic about the stock prices of most companies in the gaming sector.

We note most casino/supplier valuations are already trading several turns below historical averages despite reaching new gaming records and a history of sector revenue resilience.

David Bain, B. Riley Securities gaming analyst 

Economists and analysts have been quick to caution against panic, suggesting that the stock declines do not necessarily foreshadow an economic slowdown. Many experts believe the broader stock market is merely experiencing some long overdue correction, predicting a return to normalcy. Gambling industry insiders remain cautiously optimistic, highlighting the sector’s historical resilience and potential for recovery despite current market volatility.