JPMorgan has begun coverage on the U.S. gaming sector, naming PENN Entertainment Inc (NASDAQ:PENN), Red Rock Resorts (NASDAQ:RRR), and Caesars Entertainment Corporation (NASDAQ:CZR) as its top picks.
The Wall Street bank favors regional and Las Vegas locals over digital and Strip exposures, citing macro and policy uncertainties.
“The Gaming sector is rife with risks, but potential rewards are high,” analysts led by Daniel Politzer wrote in a Monday note.
They highlight macro headwinds, tariff risk, and inflation as key pressures for land-based gaming, while regulatory and tax concerns weigh on digital operators. Despite those challenges, JPMorgan sees tactical opportunities and valuations appearing “appropriate for ‘Gaming 2.0.’”
Among the new Overweight-rated names, PENN stands out for its $1 billion pipeline of new projects due over the next two years, and a $325 million share buyback plan—equivalent to roughly 14% of its market cap.
The analysts expect ESPN BET losses to decline, while highlighting the value in PENN’s $65 million-plus market access fees.
For RRR, JPMorgan points out its improving EBITDA visibility into 2026-27, a high-quality asset base in a supply-constrained market, and potential upside from legislative changes, including tax relief on tipped income.
“Each [growth driver] could = $20-30m EBITDA y/y vs Street’s FY26 +$30m y/y,” the note states.
Caesars Entertainment also earns an Overweight rating, with the bank pointing to regional stabilization and the potential for $3 billion in cumulative net cash flow through year-end 2027—about 50% of its current market cap.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. The analysts see valuation support even assuming no value for its OpCo assets and noted, “CZR is the sole omnichannel operator to build a profitable digital business.”
Among digital names, Sportradar Group AG (NASDAQ:SRAD) received an Overweight rating and “honorable mention” status, seen as better positioned near term due to a more stable revenue mix and improving margins.
JPMorgan believes gaming stock performance near term will hinge on “catalysts, momentum and intangibles,” while longer-term winners will be driven by capital allocation, asset quality, growth, and earnings visibility.
Despite persistent macro uncertainty, the bank sees room for upside in select names.
