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With the threat of a labour stoppage in the rear-view mirror, casinos entered 2019 with some solid tailwinds. The end of a ban on sports betting in the spring of 2018 has opened the door for an extremely lucrative market.
The economy has also been booming in the United States, which has historically been positive news for gambling houses.
Now two of the largest gaming giants are reportedly exploring a merger.
Eldorado Resorts (NASDAQ:ERI) and Caesars Entertainment (NASDAQ:CZR) are reportedly in the early stages of exploring a merger.
Sources saw Caesars has provided financial information, but Eldorado has yet to submit a formal bid. Caesars has a market capitalization that exceeds $5 billion and has a debt pile that is over $9 billion.
The merger would allow the companies to present a firmer challenge to casino resorts giants like Las Vegas Sands, MGM Resorts, and Wynn Resorts. Eldorado Resorts stock has climbed 27% in 2019 as of close on March 19. Caesars stock is up 25% but is down 30% year over year.
A merger would likely provide a short-term boost, but in the long-term the competition is fierce.
Casinos have thrived over the past several years but slowing economic growth and the rise of online gaming providers will present a challenge over the next decade. Investors should be focusing their attention on these kind of companies instead of conventional gaming giants that are facing significant debt.
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