Make no mistake about it: The Las Vegas economy remains depressed and the majority of gaming profits made these days are outside of the Strip in places like Macau. Slot volumes have declined for five consecutive months and will likely continue through the first quarter of 2013. Skewing the odds in the casino’s favor as a “price increase” isn’t a sustainable method of fixing the problem.
The main problem with slots lies in the demographics of gamers. Younger people aren’t interested in playing slots when there’s Blackjack and Hold ‘Em to be played. The average casino visitor continue to rise, with 65+ year olds rising to 35% of the visitors. Baby boomers are dying out.
MGM Resorts (MGM) is highly levered to Vegas whereas other companies focus more on Macau. Thus we are negative on the long-term fundamentals of domestic gaming. We see earnings risk on the near-term duration for MGM and the stock is below our TREND line of resistance from a quantitative perspective.