03:44 PM EDT, 04/09/2024 (MT Newswires) -- Gaming stocks have largely underperformed the broader market so far this year, with the exception of DraftKings ( DKNG ) , which is poised for another "solid" quarter amid online sports betting tailwinds, Morgan Stanley said Tuesday.

The gaming stocks covered by the brokerage are up 5% since the start of the year, lagging the S&P 500 index's 9% gain, with individual performances seen between up 29% and down 33%. DraftKings ( DKNG ) has been the best performer, while Penn Entertainment ( PENN ) has been the worst, Morgan Stanley said in a note.

Gaming stocks have continued their mixed performance so far this year following a similar performance last year. They have maintained year-to-date underperformance on average, as domestic data outside of the Las Vegas strip's revenue per available room and gross gaming revenue is "choppy" and concerns regarding consumer spending at lower income levels continue, according to the note.

"While some investors are looking for a 'new cycle' to reaccelerate trends, we do not see an inflection for gaming given already lagging fundamentals (versus) macro," the brokerage wrote. The firm said it favors areas with tailwinds, like online sports betting. Within domestic gaming, forward indicators seem to be "robust" with strong air capacity and forward hotel pricing, it said.

Morgan Stanley raised its respective price targets on the stocks of DraftKings ( DKNG ), Penn, Caesars Entertainment ( CZR ) , Boyd Gaming ( BYD ) , MGM Resorts International ( MGM ) , Red Rock Resorts ( RRR ) , Sportradar Group ( SRAD ) , Las Vegas Sands ( LVS ) and Wynn Resorts ( WYNN ) .

Regional brick and mortar gaming revenue is down mid-single digits year over year through February, while iGaming trends appear to be strong with growth of about 26%, marking what is expected to be the seventh straight quarter of above 20% growth, according to the note.

"Investor debate appears to have pivoted in the digital segment from the threat of 'new' competition to the threat from existing competition," Morgan Stanley said. DraftKings ( DKNG ) is likely to post "solid" first-quarter results, with a beat versus both its own outlook and Wall Street's views, the brokerage said.

"Internationally, Macau remains in recovery albeit slower than investors have anticipated, whereas Singapore remains on a steady path for growth as China visitation has boosted the market," the firm said.

Price: 43.86, Change: +0.78, Percent Change: +1.81