As COVID-19 vaccinations continue across the U.S. and all eyes turn to the reopening of sectors that have been battered by the pandemic, investors may want to place a bet on Las Vegas.

Strategists at KeyBanc Capital Markets say strong revenue in April and accelerating May foot traffic in Sin City and other U.S. gambling centers have made them upbeat on the gaming and leisure sector.

In a report published on Wednesday, a team led by Brett Andress at KeyBanc said the strategists continue to see signals of an accelerated recovery taking place this spring/summer.

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The comeback is accelerating in Las Vegas, they said, with data showing an encouraging pickup in the number of visitors from the lows of the pandemic. The number of people passing through the Vegas strip rose to 67% of 2019 levels in April 2021 from 57% in March.

So far in May, the number of visitors in Vegas is still picking up rising to 68% of 2019 levels, with traffic on the weekend continuing to make fresh highs. While the number of weekday visitors a better measure of normal, in the strategists view has fallen back from highs reached in March due to spring break and March Madness, it continues to remain above initial reopening levels.

The strategists said that while gross revenue from in-person gambling was strong in March, it grew again in April. In-person gross gaming revenues in 18 states, as a percentage of 2019 levels, grew an average of 16 percentage points from March to April. And data show May remains elevated, they said.

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The team at KeyBanc said that the continuing recovery, and the sustainability of margins in the gambling business, could lead to upgrades across the sector. The group is bullish on seven stocks.

In particular, the strategists highlightedBallys BALY, -0.43%, Boyd BYD, -1.50%, andChurchill Downs CHDN, -1.71%, with target prices on the stocks suggesting that shares in all three companies could climb 23%. The valuations of the three dont reflect strong opportunities in interactive gaming and other areas where the companies could benefit in the future, they said.

KeyBanc is also positive onCaesars CZR, -0.44%, MGM Resorts MGM, -2.10%, Penn National Gaming PENN, -1.55%, andRed Rock Resorts RRR, -0.97%. A risk across the whole sector remains a resurgence of the COVID-19 pandemic that could lead to restrictions or curtail travel and in-person gambling.

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Place a bet on Las Vegas and the economic recovery with these gaming stock picks - MarketWatch