What do soccer, strippers, and gambling have in common? These themes are part of the Zack’s Leisure and Recreation Services group. Though the Leisure and Recreation Services Group is ranked a lowly 173 out of 249 (bottom 30%) industry groups tracked by Zacks, there are some highly ranked individual stocks within the group, including
Manchester United (
MANU
),
RCI Hospitality Holdings
RICK
,
and Caesars Entertainment
CZR
.
Manchester United (MANU)
Manchester United, or Man United, is a professional football (aka soccer) team based in Old Trafford, England. Man U plays in the Premier League, the preeminent division of the English Football League. The team is named the Red Devils and is one of the top 5 most valuable sports teams in the world, enjoying an enthusiastic and worldwide following. While the team’s history is steeped in success, the past five seasons have produced dismal results and missed the high expectations the club’s fans are used to.
Like the play on the field, the stock’s performance has been underwhelming since going public in August 2012. EPS has been negative since 2019, and the stock has mostly chopped back and forth until recently. However, the company’s fortunes are changing. A recent report stated that Man U’s owners, the Glazer family, are interested in selling the club by early next year. When the news dropped late last month, shares rocketed by more than 60% for the week on volume six times the norm.
Image Source: Zacks Investment Research
Pictured: A report suggesting that management will sell the company has catapulted the stock hgiher.
Takeaway:
Though the stock’s performance has been lackluster, a sale can be a catalyst over the next few months and breathe new life into the team and thus the company. Despite the spotty earnings results in recent years, MANU boasts a Zack’s Rank of 2. If the Glazers can find the proper suitors, the company should be able to obtain a price tag that will put it at or near the wealthiest top sports franchises. Rumored potential buyers include Jeff Bezos. The deal would make sense as
Amazon
AMZN
has already inked a broadcasting deal with the Premier League.
RCI Hospitality Holdings Inc (RICK)
RCI Hospitality owns and operates nightclubs that offer live adult entertainment, restaurant, and bar services. Since the pandemic (when EPS dropped significantly due to quarantine and mandates) the stock has been on a tear. Earnings and sales are consistent, having grown at a double-digit pace since March 2021. However, RICK’s Zacks Rank has fallen to a 2 as recent EPS consensus estimates have fallen slightly.
Spin:
Management is not taking its recent success for granted and resting on its laurels. Yesterday, RICK management announced the second-largest acquisition in the firm’s history and one of the largest in the history of the adult nightclub industry. Rick’s will acquire five adult nightclubs in Texas which are expected to eventually add $14-16 million in EBITDA each year. If the deal meets expectations over the next few years and adds 15% or more to EBITDA, it should act as a significant tailwind for the firm. Investors will be able to get more color on the deal and earnings when RICK reports after the close.
Image Source: Zacks Investment Research
Pictured: RICK’s EBITDA. A recently announced acquisition will look to continue the healthy trend.
Caesars Entertainment (CZR)
Caesars Entertainment is a casino operator and hospitality company based in Reno, Nevada. The company owns and operates more than 50 properties under different brand names. Though Caesars is smaller than competitors such as
Wynn Resorts
WYNN
and
Las Vegas Sands
LVS
,
the company has been profitable over the past two quarters, while the others have not.
Image Source: Zacks Investment Research
Pictured: Zack’s Consensus Estimates sugggest CZR’s will grow at a healthy pace over the next two years.
View:
Caesar’s is one of the only major casino operators that have been profitable recently. Furthermore, estimates over the next two years paint a rosy picture. If CZR can meet those expectations, investors will be rewarded. The stock is currently trying to retake its 200-day moving average.
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