3 Gaming Stocks to Add to Your Portfolio on Promising Industry Trends

The Zacks Gaming industry is exhibiting robust growth, propelled by a 12.2% year-over-year increase in Macau's August gross gaming revenues to MOP 22.15 billion ($2.76 billion) and a 9.8% rise in U.S. commercial gaming revenues to $19.44 billion in Q2 2025, largely attributed to expanding sports betting. This sector, ranked in the top 39% by Zacks and outperforming the S&P 500 by 37.3% over the past year, maintains a positive near-term outlook despite trading at a premium EV/EBITDA of 21.45 and facing economic uncertainties. Companies such as Boyd Gaming, Red Rock Resorts, and Melco Resorts & Entertainment are capitalizing on these trends, showing strong recent share price appreciation and upward revisions in 2025 earnings estimates.

Analysis

The gaming industry is exhibiting robust fundamental momentum, underpinned by dual growth engines in Macau and the United States. Macau's gross gaming revenues (GGR) increased 12.2% year-over-year in August to $2.76 billion, indicating a solid recovery, while U.S. commercial gaming revenues grew 9.8% year-over-year to $19.44 billion in the second quarter of 2025, largely driven by the expanding legalization of sports betting. This strong performance has propelled the industry to a 37.3% gain over the past year, significantly outperforming the S&P 500. Analyst sentiment is positive, as reflected by the industry's Zacks Rank in the top 39% and upward revisions in aggregate earnings estimates. However, this optimism is tempered by a premium valuation, with the industry trading at a trailing EV/EBITDA of 21.45, above both the S&P 500's 18.35 and its own three-year median of 18.67. This valuation premium exists alongside macroeconomic risks, including inflation and potential declines in consumer discretionary spending. Specific operators are capitalizing on the favorable trends: Melco Resorts (MLCO) is benefiting from the Macau recovery, evidenced by a 69% surge in its 2025 earnings estimates, while Red Rock Resorts (RRR) and Boyd Gaming (BYD) are leveraging strong U.S. operations, with their earnings estimates also revised upward by 12.7% and 4.9%, respectively.

Key Decisions for Investors

• Given the strong revenue growth in both U.S. and Macau markets, investors could consider overweighting the sector, with a focus on companies demonstrating direct exposure and strong execution, such as Melco Resorts for its leverage to Macau's recovery.
• The industry's premium EV/EBITDA valuation warrants caution; it is prudent to monitor for attractive entry points and hedge against macroeconomic risks like persistent inflation that could impact consumer discretionary spending.
• Investors should closely track key performance indicators, such as monthly Macau GGR figures and U.S. state gaming revenue reports, as any deceleration could signal a shift in momentum and require a thesis reassessment.
• Consider focusing on names with strong upward earnings estimate revisions, like MLCO, RRR, and BYD, as this indicates growing analyst confidence in their ability to outperform and capitalize on industry tailwinds.