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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
Macroeconomic Pressure on Discretionary Spending: Economic uncertainty and persistent inflation have started to weigh on consumer discretionary spending, which directly impacts casino visitation and online betting activity. Gaming and gambling are largely entertainment-driven expenditures, making them sensitive to shifts in household budgets. When consumers face higher costs for essentials such as housing, food and energy, they often reduce spending on leisure activities like casino trips, sports betting and online gaming. This environment can lead to slower revenue growth for operators, particularly in regional markets that depend heavily on local consumer spending.
Rising Regulatory Pressure and Tax Burden: The U.S. gaming industry continues to face increasing regulatory scrutiny and higher tax rates across several states. As online sports betting and iGaming expand, many state governments are imposing stricter compliance requirements and higher tax structures to boost public revenues. These measures can significantly compress operator margins and increase operating costs. Additionally, the lack of uniform federal regulation means companies must navigate a complex patchwork of state-specific rules, licensing procedures and reporting requirements, which adds administrative burden and slows expansion plans.
Macau Gaming Revenues Rise: Macau’s gaming sector reported moderate growth in February, according to the Gaming Inspection and Coordination Bureau. Industry-wide gross gaming revenues reached MOP20.6 billion ($2.56 billion) during the month, reflecting a 4.5% increase from the same period last year. However, the figure declined from January’s MOP22.6 billion, even though February included the nine-day Chinese New Year Golden Week holiday. Analysts noted that casino activity was relatively slow in the early part of the holiday period before improving later, which helped support the final monthly numbers. For the first two months of 2026, Macau’s total gaming revenues stood at MOP43.3 billion, marking a 13.9% year-over-year rise.
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 others. 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. Carrying a Zacks Industry Rank #176 places it in the bottom 28% of more than 243 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.
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 Underperforms the S&P 500
The Zacks Gaming industry has underperformed the S&P 500 Index and outperformed the broader Zacks Consumer Discretionary sector in the past year.
The industry has declined 3.5% over this period against the S&P 500 Index’s growth of 23.1%. In the same time frame, the sector has gained 1.2%.
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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 14.96 compared with the S&P 500’s 17.76.
Over the past three years, the industry has traded as high as 27.49X and as low as 14.22X, with a median of 18.39X, as the chart below shows.
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3 Gaming Stocks to Watch
Super Group: The company’s growth is supported by strong customer momentum, with record monthly active users, wagers and deposits. Super Group also benefited from focusing on markets where it has stronger competitive advantages after exiting the U.S. iGaming business.
This Zacks Rank #1 (Strong Buy) player’s shares have gained 59.2% in the past year. SHGC’s 2026 earnings are likely to witness growth of 60% year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Monarch Casino & Resort: The company’s performance is supported by strong revenue and profitability growth, highlighted by record financial results in 2025. The company benefited from rising market share at both Atlantis and Monarch Black Hawk properties, which helped lift net revenues and adjusted EBITDA.
This Zacks Rank #2 (Buy) player’s shares have gained 13.8% in the past year. MCRI’s 2026 earnings are likely to witness growth of 9.6% year over year.
Accel Entertainment: Accel’s performance is supported by the expansion of its distributed gaming network, with a growing number of locations and terminals driving higher revenues. Margin improvement in key markets like Illinois and Montana, along with strong growth in newer markets such as Nevada and Louisiana, is also aiding results. Strategic acquisitions, technology upgrades and a strengthened balance sheet further support its growth and operational efficiency.
This Zacks Rank #2 company’s shares have gained 14.8% in the past year. ACEL’s 2026 earnings are likely to witness growth of 21.7% year over year.
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This article originally published on Zacks Investment Research (zacks.com).
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