A January 23 investor note from J.P. Morgan presented a cautious assessment of the global gaming sector ahead of fourth-quarter earnings, with analyst Daniel Politzer pointing to persistent operational and market pressures weighing on investor sentiment.
“Gaming stocks are carrying a lot of baggage and negativity right now,” Politzer wrote, identifying Las Vegas Sands and DraftKings as the only two companies he favored going into earnings reports.
Politzer said digital gambling offered the highest likelihood of outperforming projections, while at the same time remaining vulnerable to policy and market uncertainty.
He noted that these equities “are dogged by investor concerns on handle growth, prediction markets, and regulatory/tax risk (legislatures are in session).” According to the analyst, market sentiment toward digital wagering remains volatile amid slowing growth rates and shifting regulatory signals.
Macau-exposed operators are also expected to face a muted environment. Politzer cited higher operator spending linked to diversification within China’s gaming sector, along with concerns about revenue performance in the second half of 2025.
Macau gaming revenue grew 15% in the most recent quarter, reaching 92% of 2019 levels, but growth was uneven. VIP and other high-end play expanded by 45%, while mass-market growth remained in the mid-single digits.
Against this backdrop, Politzer projected Las Vegas Sands’ Macanese cash flow at $626 million for the fourth quarter of 2025, in line with expectations, while forecasting a six percent beat in Singapore that would bring cash flow there to $723 million.
He suggested that future improvement in Macau depended on execution, whereas Singapore would “raise the roof” for future cash-flow expectations. By comparison, he forecast fourth-quarter Macanese cash flows of $292 million for MGM China and $281 million for Wynn Resorts, each less than half of Sands’ projected figure.
Despite early momentum, Politzer urged caution in interpreting near-term trends. “January is off to a good start, but we likely won’t learn much,” he wrote, noting that the Chinese New Year’s timing in mid-February limits the usefulness of early indicators. He warned that earnings comparisons would become more challenging in the latter half of 2026.
On the Las Vegas Strip, Politzer described expectations as subdued, with investors questioning the nature of the recent slowdown in leisure demand. He framed the issue as whether the decline was “structural or cyclical,” adding that even a cyclical downturn created uncertainty over when the next expansion phase might begin.
He did not expect meaningful relief until the easier comparisons of the third quarter of 2026. For the first quarter, he forecast revenue declines of six percent for MGM Resorts International and one percent for Caesars Entertainment, while Wynn is expected to be flat. The second quarter is projected to stabilize, with growth of two to three percent anticipated in the fourth quarter of 2026.
In digital wagering, Politzer said the introduction of sports betting in Missouri would contribute to nine percent handle growth for the quarter, a slowdown from earlier months. Handle growth reached 15% in October and 10% in November before contracting by 3% in December.
He projected DraftKings to achieve 11% handle growth, while FanDuel was expected to post less than half that rate due in part to heavy promotional activity. “On a more positive note, hold was mostly normal,” he wrote, following a weak fourth quarter for sportsbooks.
Politzer reiterated a favorable view of DraftKings, forecasting $300 million in cash flow, which he estimated was 20% above Wall Street expectations. By contrast, he said Wynn, affected by “choppy hold” in Macau, and Penn Entertainment were likely to undershoot earnings forecasts.
The note concluded with revisions to several price targets. Politzer reduced his targets for Caesars to $37 per share and DraftKings to $41, while cutting Wynn by two dollars to $143. He raised targets by one dollar each for Churchill Downs to $131, Las Vegas Sands to $71, and Station Casinos to $20, while reducing Sportradar by five dollars to $30.
Original article: https://www.yogonet.com/international/news/2026/01/26/117294-jp-morgan-sees-limited-upside-for-gaming-stocks-as-q4-earnings-approach
