JPMorgan has initiated coverage of the U.S. gaming industry, spotlighting a mix of regional and omnichannel operators expected to outperform amid macroeconomic uncertainty. The firm’s top picks include PENN Entertainment (NASDAQ:PENN), Red Rock Resorts (NASDAQ:RRR), Caesars Entertainment (NASDAQ:CZR), and Sportradar Group (NASDAQ:SRAD).
Led by analyst Daniel Politzer, JPMorgan’s team underscores that while the gaming space faces heightened risk—ranging from economic headwinds to policy volatility—the upside remains compelling. The sector is entering what the bank describes as “Gaming 2.0,” defined by evolving platforms, policy shifts, and competitive recalibration.
PENN, RRR, and Caesars Lead the Pack
Among JPMorgan’s Overweight-rated picks, PENN Entertainment stands out due to its $1 billion project pipeline and a $325 million share buyback—roughly 14% of its market cap. Analysts project narrowing losses from ESPN BET and highlight over $65 million in annual market access fees as a hidden strength.
Red Rock Resorts benefits from a high-quality asset footprint in a supply-constrained Las Vegas locals market. Its EBITDA visibility is strong into 2026–2027, with additional upside possible from proposed tax relief for tipped income. JPMorgan estimates each potential policy catalyst could add $20–30 million in EBITDA, significantly above the Street’s FY26 projections.
Caesars Entertainment is also rated Overweight, bolstered by regional stability and the potential to generate $3 billion in net cash flow through 2027—equal to 50% of its current market capitalization. The analysts note that Caesars is uniquely positioned as the only profitable omnichannel operator, blending land-based and digital effectively.
Digital Play: Sportradar Gains “Honorable Mention”
While JPMorgan remains cautious on digital-first gaming stocks due to regulatory and tax risks, Sportradar (SRAD) earns an Overweight rating and “honorable mention” status. The firm credits SRAD’s stable revenue base and expanding margins, suggesting it is better positioned for near-term performance compared to other digital peers.
Key Takeaways from JPMorgan’s Note:
- Top Picks: PENN, RRR, CZR, SRAD
- PENN: $1B in new projects, $325M buyback
- RRR: EBITDA potential boosted by tax reform
- CZR: $3B projected net cash flow by 2027
- SRAD: Strong revenue mix, margin expansion
JPMorgan concludes that the success of gaming stocks in the near term will depend on short-term catalysts and execution, while long-term winners will be shaped by asset quality, earnings visibility, and capital strategy.
