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The stock market has been getting a lot more attention in recent weeks due to the incredible story surrounding Gamestop’s share price, which rocketed and subsequently collapsed.
Lots of people might therefore be buying stocks for the first time, hoping to make their fortune, and carrying out research to see which businesses will make a smart investment.
Online gambling on the rise
One sector catching a lot of attention is online gambling, especially as this is being legalized slowly on a state by state basis across America.
Online gambling increased a lot in popularity during 2020, partly due to the fact that COVID-19 lockdowns resulted in many land-based casinos being forced to close their doors. Many casino companies have sustained significant losses over the last few months as a result.
Olivia King from ND365 did not mince her words, “Investors who want to keep their risk low should avoid brick and mortar casino stocks for at least another 6 months. Sticking with one of the biggest online gambling brands is a much smarter choice in early 2021.”
With that excellent advice in mind, here are three casino stocks to run away from this year.
Melco Resorts
The operator of various casino developments in Asia and Europe, Melco Resorts has been hit particularly hard by the global pandemic over the course of the past 12 months.
With many of the company’s sites located in Macau, which has seen its tourism sector devastated during 2020, Melco Resorts has been struggling financially for a while.
The firm recently announced that the City of Dreams Mediterranean integrated resort it is building is not going to be ready to be opened until 2022. That site, in Cyprus, is set to become the largest casino resort of its kind in Europe but the development has been hit by delays.
Melco Resorts has an increasing amount of debt, which led Moody’s to warn that the amount of money the company owes might rise to as high as around $7 billion in the next 18 months.
During the past month, the share price of Melco Resorts slipped from $18 to just over $15, though it has since rebounded.
Stocks in the firm were as high as $22 before the pandemic hit, but they fell by nearly 50 per cent in the course of only a few weeks when the virus started to take hold.
Melco Resorts seems to have a shaky future and it would be a big risk to invest in the company.
Churchill Downs Incorporated
The owner of the world-famous Churchill Downs racetrack – which hosts the Kentucky Derby – could also be in trouble in 2021.
Churchill Downs Incorporated has stakes in key sites such as Rivers Casino Des Plaines, Turfway Park in Northern Kentucky and the $65 million Derby City Gaming. Like Melco Resorts, Churchill Downs Incorporated saw its share price collapse between February and April 2020.
Stocks slipped from $163 on February 19 to a low of $61 just a month or so later. By August, the company’s share price had rebounded to around the same level as before the pandemic, but in recent months it has proved a wild ride for investors with regular large spikes and falls.
What Churchill Downs Incorporated has going for it is the fact it has a stake in online gambling, which could prove incredibly profitable in America in the near future. The firm owns America’s top online horse racing gaming platform, TwinSpires, but faces a lot of competition in the sector.
Las Vegas Sands
The last of the three casino stocks to avoid this year is Las Vegas Sands, which has a range of land-based casinos around the world including two on the Las Vegas Strip – The Venetian and The Palazzo – and the Marina Bay Sands, which is located in Singapore.
Las Vegas Sands has tried to diversify its portfolio in recent years but most of its properties are still in Sin City itself or Macau, two markets that are yet to bounce back from the pandemic.
Shares in Las Vegas Sands are considerably down when compared to a year ago, though the stocks have recovered somewhat from the concerning lows hit in March and April 2020.
The death of the company’s founder Sheldon Adelson earlier in the year means that Las Vegas Sands is being steered in a fresh direction and the firm is belatedly looking into online gambling.
But such a competitive market will be hard to breach and, if visitors do not return to Las Vegas Sands properties in Vegas and Macau, the short-term future of the company is quite bleak.
