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The U.S. gambling sector appears to be weakening, but there are bright spots overseas — and online.
Delaware Gov. Jack Markell signed a bill Thursday legalizing online gambling under recently loosened federal guidelines. It's the first state to do so, but almost certainly won't be the last.
A recent Moody's report specifically cited casinos with debt obligations coming due or that have a highly leveraged capital situation, and said Caesars Entertainment (CZR), Revel Atlantic City and Las Vegas-based CityCenter Holdings are at greatest risk.
"The improving trend in gaming revenues in place since the middle of last year appears to be stalling," said Moody's Vice President Peggy Holloway in a written statement after the ratings agency put out its June 27 gaming report.
"Momentum started slowing in March, and then in May gaming jurisdictions reported outright declines in gaming revenue," she added.
Bank of America Merrill Lynch (BAC) Friday downgraded Caesars to underperform from neutral, and cut its price target to 16 from 18.
Caesars shares rose 0.7% to 11.40 on Friday amid a broad market rally.
Moody's also pointed to recent expansions not only in Las Vegas but in other regions of the country, saying the market could get saturated if consumers remain reluctant.
"Newer casinos such as Revel in Atlantic City, Resorts World in New York and Rivel Casino in Illinois do not appear to be boosting gaming demand in their markets," Moody's said.
Expansion in other markets may also be drawing gamblers away from Vegas and other U.S. gambling hot spots.
Las Vegas casino giants Las Vegas Sands (LVS), MGM Resorts (MGM) and Wynn Resorts (WYNN) have boosted revenue and profits in recent years, as has Hong Kong's Melco Crown (MPEL), by building in Macau, the special casino gambling region on China's south coast, about 35 miles from Hong Kong.
But China has put limits on growth in its only legal casino gambling location, so casinos are looking elsewhere.
The Philippines is looking at Macau as an example and planning to build its own Vegas-type casino district. Bell Corp. was one of four winners of gaming licenses there recently. And reports say it will partner with Melco Crown to develop and manage a $1 billion casino there.
Meanwhile, U.S. casinos are counting on online gaming to rejuvenate earnings as competition in other countries, and high unemployment and uncertain economic prospects at home keep consumers at bay.
Delaware's new gambling law allows online slots and table games. It also expands keno beyond state's three racetrack casinos to at least 100 other sites, and betting on NFL football to at least 20 non-casino sites.
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