The Zacks Gaming remains under pressure amid persistent economic uncertainty, stubborn inflation and escalating geopolitical tensions,  all of which continue to cloud investor sentiment and weigh on sector performance. However, an increase in Macau gaming revenues, strong demand for sports betting and robust U.S. commercial gaming revenues are aiding the industry. Stocks like Melco Resorts & Entertainment Limited MLCO, Accel Entertainment, Inc. ACEL and Bally's Corporation BALY will likely gain traction from upbeat demand.

Industry Description

The Zacks Gaming industry includes companies that own and operate integrated casinos, hotels and entertainment resorts. Some industry players also deliver technology products and services across the lotteries, electronic gaming machines, sports betting and interactive gaming markets. Some firms develop and operate gaming establishments and associated lodging, restaurants, horse racing and entertainment amenities. Many companies are involved in developing and selling gaming applications. E-sports or sporting events or tournament services, content management systems, video software, mobile applications and e-sports data platform solutions are provided as well.

Key Themes Shaping the Gaming Industry

Economic Uncertainty Impacts the Gaming Industry: The gaming and gambling industry is facing significant headwinds due to ongoing economic uncertainty, rising inflation and heightened geopolitical tensions. Economic instability often leads to reduced consumer discretionary spending, directly impacting casino visits, online betting and overall gaming revenues. Persistent inflation erodes consumers’ disposable income, making them less likely to spend on non-essential activities, such as gambling. Meanwhile, geopolitical risks, including regional conflicts and regulatory disruptions, add another layer of unpredictability, especially for companies with international operations or exposure to volatile markets. Together, these macroeconomic challenges have created a tough operating environment for the industry.

Macau Gaming Revenues Improve: Macau’s gross gaming revenues (GGR) climbed to MOP 21.19 billion ($2.62 billion) in May, reaching its highest monthly level since January 2020. According to the Gaming Inspection and Coordination Bureau this represents a 5% year-over-year increase and a solid 12.4% gain over April’s MOP 18.86 billion ($2.34 billion). May’s performance also outpaced the previous post-pandemic high set in October 2024, when revenues stood at MOP 20.79 billion ($2.57 billion), highlighting the continued momentum in Macau’s gaming recovery. Casino operators are adopting a disciplined operational strategy by streamlining business processes, enhancing marketing approaches and renegotiating contracts with vendors and third parties. There is an intense emphasis on improving service quality and staffing levels to cater to gamers better.

U.S. Commercial Gaming Revenues Robust: In April 2025, U.S. commercial gaming revenues increased 5.6% year over year. Data from state regulators, compiled by the American Gaming Association, revealed that revenues from traditional casino games, sports betting and iGaming totaled $6.18 billion.

Sports Betting Acts as Major Driver: The legalization of sports betting in Delaware, Mississippi, New Jersey, New Mexico, West Virginia, Pennsylvania, Rhode Island, Montana, Indiana, Tennessee, Illinois and New Hampshire has been driving growth for a while. Bettors can place wagers via digital platforms in Connecticut, Kentucky, Michigan, Massachusetts, Maryland, Minnesota, Missouri, Kansas, Louisiana, Oklahoma, South Carolina, California, Oregon, Arizona, Montana, Colorado and other states. Some popular gaming applications include DraftKings, Barstool, FanDuel, BetMGM, BetRivers, Fox Bet and BetMonarch. 

Zacks Industry Rank Indicates Dull Prospects

The Zacks Gaming industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #143, which places it in the bottom 41% of more than 244 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential.

Despite the industry’s drab near-term prospects, we will present a few gaming stocks that you can add to your investment portfolio, given their strong fundamentals. However, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Outperforms the S&P 500

The Zacks Gaming industry has outpaced the S&P 500 Index and the broader Zacks Consumer Discretionary sector in the past year.

The industry has risen 17.5% over this period compared with the S&P 500 Index’s growth of 9.4%. In the same time frame, the sector has gained 17.4%.

1-Year Price Performance

Gaming Industry's Valuation

Since gaming companies are debt-laden, valuing the same based on the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) ratio makes sense. The industry currently has a trailing 12-month EV/EBITDA ratio of 23.24. The space is trading at a premium compared with the market at large, as the trailing 12-month EV/EBITDA ratio for the S&P 500 is 16.81.

Over the past three years, the industry has traded as high as 41.15X and as low as 17.52X, with a median of 22.82X, as the chart below shows.

Enterprise Value-to-EBITDA Ratio (Past 5 Years)

3 Gaming Stocks to Watch

Melco Resorts & Entertainment: The company is benefiting from several positive business drivers, particularly in its core Macau operations. The company is experiencing strong momentum in mass gaming, with consistent monthly growth in customer activity and record-setting engagement in its mass gaming segment. This reflects the effectiveness of its strategic positioning and the strength of its product offerings.

This Zacks Rank #2 (Buy) player’s shares have gained 21.8% in the past three months. MLCO’s 2025 earnings estimates have increased 8.7% to 25 cents in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: MLCO

Accel Entertainment: The company is benefiting from a combination of operational expansion and strategic market entry that is driving improved performance. ACEL’s growth is supported by an increasing number of gaming locations and terminals, which have led to stronger financial results. Its recent move into casino and horse racing operations through Fairmount Park is already showing promise, with solid customer engagement despite early weather-related setbacks. Accel’s disciplined execution and focus on enhancing its core operations, while entering complementary markets, are positioning the company for sustained growth. These efforts are also helping boost free cash flow generation and overall investor confidence.

This Zacks Rank #2 player’s shares have gained 13.7% in the past three months. ACEL’s 2025 earnings estimates have increased 4.9% to 85 cents in the past 60 days.

Price and Consensus: ACEL

Bally's: The company is taking strategic steps to drive long-term growth, highlighted by its recent acquisition of four regional gaming properties through deals with The Queen Casino & Entertainment and Standard General. These additions have expanded Bally’s domestic footprint and are being integrated with a focus on operational efficiencies, margin improvement and profitable revenue growth by leveraging best practices across both legacy and newly acquired assets. The company is also working to enhance its International Interactive business while optimizing its North America Interactive segment.

This Zacks Rank #2 company’s shares have declined 35.7% in the past three months. The company’s loss estimates for 2025 have been unchanged at $1.65 in the past 30 days.

Price and Consensus: BALY

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Melco Resorts & Entertainment Limited (MLCO) : Free Stock Analysis Report

Accel Entertainment, Inc. (ACEL) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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