Leaving Las Vegas Without Spending So Much

Casino operator MGM is being sold aggressively today despite trying to sound optimistic on its earnings call after reporting record net revenue, pointing to long-term opportunities in China, Japan, and online with BetMGM. 

Be that as it may, the firm missed on bottom line earnings and is being punished in kind by the market.  

For our purposes, it is worth remembering just how tightly correlated discretionary spending can be with consumers and the gaming industry. Without question, Las Vegas has changed over the years to appeal more to non-gamblers coming to town for restaurants, shows, clubs, and the like, And that trend will only persist. 

However, considering not only MGM but also LVS and WYNN are all well below their 2007 prior all-time highs it is significant that the market is not giving them much leeway at all these days, including MGM today down more than 12% as I write this. 

On the updated MGM monthly chart, below, note the relative weakness to the broad market for nearly seventeen years now. The last few years could easily amount to a massive head and shoulders top, too. 

Consumer discretionary tastes have clearly shifted over the years, as is the norm. So to expect casino table game and slot machine players to surge is unrealistic. Still, despite all the evolution on the Las Vegas Strip on top of MGM's other properties nationally and globally (and BetMGM) the stock still missed earnings which speaks to the idea of a weakening consumer.

In sum, sticky high inflation here in the real world (i.e. inflation on a higher plane despite the rate of inflation having slowed in recent quarters) coupled with a challenging private sector (not government jobs) equals a consumer feeling the squeeze...and not in a good what-happens-in-Vegas kind of way.