Melco Resorts stock is the biggest beneficiary, rising 15%.
Casino gambling stocks have been surging this week, posting double-digit gains over the past two days.
Melco Resorts and Entertainment (NASDAQ:MLCO) has spiked 15% since Tuesday to around $8.30 per share, while Wynn Resorts (NASDAQ:WYNN) has jumped 10% to roughly $103 per share.
Also, Las Vegas Sands (NYSE:LVS) has gained 9% in the past two days to about $47.50 per share, while MGM Resorts (NYSE:MGM) stock is up about 8% since Tuesday to over $37 per share.
The main driver for all of these stocks was a positive report from the Macau Gaming Inspection and Coordination Bureau on casino gaming revenue.
The bureau reported revenue of 21.1 billion MOP, the local currency, which is around $2.6 billion USD. That’s up 19% year-over-year. Year-to-date through June, Macau has generated 118 billion MOP, $14.6 billion USD, which is up 4.4%.
All four of the casino companies have resorts in Macau, which is one of the largest gambling centers in the world.
Melco stock spikes 15%
Melco is not the largest operator in Macau, but it does generate the vast majority of its revenue from its Macau properties, thus the sizable jump in stock price. Almost 90% of its revenue comes from Macau resorts.
Las Vegas Sands is considered the largest casino operator in Macau, which is why it also saw a double-digit spike in price. Sands China generated $1.7 billion in revenue in the most recent quarter, which is about 59% of its total revenue.
Wynn also has a significant presence in Macau, with the company generating about $865 million of its $1.7 billion in revenue from Macau – or roughly 51%.
Of the four, MGM has the smallest stake in Macau, generating about $1 billion of its $4.3 billion in total revenue from MGM China – or roughly 23%.
Offsetting Vegas slump
Macau should continue to be a revenue driver for these casinos, as analysts at Standard & Poor’s predict gross gaming revenue in Macau to increase by 5% to 6% in 2025. It should offset some of the headwinds facing their casino resorts in Las Vegas.
According to the Las Vegas Convention and Visitors Authority, visitation to Las Vegas dropped 6.5% in May, year-over-year, while hotel occupancy fell 3.1%. More specifically, gross gaming revenue in May dropped 3.9% on the Strip. Truist analyst Barry Jonas expects continued softness this summer, according to a report by the Las Vegas Review-Journal.
Analysts at JPMorgan Chase are bullish on Melco after the news, raising its price target to $9.50 per share, from $7.20. That would be 14% upside from the current share price. JPMorgan also gave the stock an overweight rating.
MGM China, the subsidiary of MGM that trades on the OTC market, also got an upgrade from Goldman Sachs to buy, from neutral.
MGM stock has a median price target of $45 per share, which would suggest 20% upside.
