Textual content dimension
Within the lunar yr of the pig, are on line casino shares able to convey house the bacon? Some analysts suppose so.
The Again Story. The final yr of the serpent was 2013, however for a lot of traders, casinos turned up snake eyes in 2018. Huge gaming firms ended the yr within the purple, damage largely by weaker income from Macau. Looking back, it’s not shocking that the Chinese language gaming island hotspot took successful. Persistent considerations a couple of world-wide slowdown–and cooling development in China particularly–as a commerce warfare with the U.S. drags on–rocked markets. Nonetheless, information from Macau missed expectations repeatedly, resulting in some painful losses for on line casino shares. Some analysts threw within the towel, whereas others are letting their bullish calls journey.
The Plot Twist. The Lunar New Yr, which fell on Feb. 5, is a large vacation for gaming firms in Macau, and at first blush at the least, casinos are off to begin, says Jefferies’ David Katz. Chinese language customers should be holding again a bit, however Katz’s analysis suggests sturdy February gross gaming income (GGR) might rise from 1% and three%, “which counsel a continued constructive context for the shares.”
He believes that mass-market gaming rose round 2% to three%, whereas VIP gaming, which had been slumping, could have jumped as a lot as 10%. That mentioned, there’s loads of elements weighing on the shares past simply GGR. Katz notes that “the macroeconomic back-drop, together with the weakening financial system and the ongoing commerce talks with the U.S. [are] vital complexities added to the market final result.” He has a Purchase ranking on
MGM Resorts Worldwide
(MGM) and Maintain rankings on
Las Vegas Sands
Elsewhere, Nomura Instinet’s Harry Curtis additionally has an upbeat learn on the Macau operators, with estimates for mass market and VIP development that roughly dovetail with Katz’s. He has Purchase rankings on MGM,
Melco Resorts & Leisure
(MLCO) and Wynn, and believes macro and particular person catalysts will enhance the shares. “We anticipate a lot better inventory worth efficiency and a number of growth for Macau operators with ramping properties (MLCO and MGM) and decrease valuations (WYNN). As GGR/day sometimes strikes sharply greater towards the tip of the [Lunar New Year] competition, which this yr lasts till Feb. 19, we might add to positions in these shares (MGM, MLCO and WYNN) forward of what needs to be a really sturdy weekly GGR estimates over subsequent one to 2 weeks.”
Shifting Ahead. All 4 shares are up by double-digit percentages for the reason that begin of the yr, helped by sturdy earnings and analysts’ opinion in addition to discount searching. The subsequent large catalyst for the shares will probably be commerce negotiations, though that would go both course. A constructive replace, and even settlement, might spike the sector, whereas failure to make progress might have the alternative impact.
Write to Teresa Rivas at [email protected]