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Are you ready to spin the wheel and try your luck at Bally’s (NYSE:BALY)? Not so fast, because BALY stock could continue to lose value in 2023. A turnaround in macroeconomic conditions would certainly help Bally recover from its meltdown. Still, the company’s fiscal numbers should set off alarm bells for cautious investors.
Don’t get me wrong: Bally’s is a huge, well-known company. In addition to the company’s 15 casinos and resorts across the United States, Bally’s has interests in the sports betting and online gaming segments.
Hold your horses, though. Financial traders, like casino players, need to be thorough and have excellent timing to be successful. As we will see, there are awkward details with Bally’s and now is not the ideal time to take a stand.
What’s going on with BALY Stock?
BALY stock might look like a bargain as it fell from $70 in 2021 to around $20 per share recently. Keep in mind, however, that not every stock that has fallen in value is good business.
It is extremely difficult to convince people to bet their hard-earned money on sports betting and online gambling in times of high inflation. Sure, inflation has come down since June, but the average American doesn’t necessarily feel like things have gotten much better.
Like cruise lines and hotels, gambling businesses really need a big boost from the economy. Inflation is not going down quickly and Americans need time to recover. Therefore, BALY stock traders should plan their entry carefully and wait for clear signals that macro-level conditions are improving.
Bally’s debt is problematic
Which businesses will really thrive when the economy improves? Companies with little debt can probably recover the fastest and deliver the best results. Bally’s is not in this group.
Recently, Bally’s completed a sale-leaseback transaction and assured that a “substantial portion of the proceeds will be applied to reduce Bally’s debt”. This, however, raises the question of how deep this debt is.
Suffice it to say, Bally’s debt burden is heavy. The latest quarterly financial report released by the company shows $164.46 million in cash and cash equivalents. However, it also shows long-term net debt of $3.41 billion. It’s a tough position to hold, especially at a time when the economy could be shaky for a while.
What you can do now
When it comes to BALY stocks, watch and wait is the best policy right now. You don’t have to be a gambler and take a stand when Bally’s is in so much debt.
That doesn’t mean you have to give up the business altogether. Feel free to check in, assess Bally’s upcoming financials, and place a very small bet if you discern substantial improvement.
As of the date of publication, David Moadel had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.