Casinos & Hotels

Macau Revenue Trends Keep Biting Casinos

It seems as though the casino sector is depending solely upon Macau for its future. That is at least what many investors would think. There is a reason—Macau was supposed to be the creation of the next Las Vegas, and the spillover effect in Asia for areas like Singapore and elsewhere were expected to keep growing the top-line and bottom line results for casino giants.

Now US-based casino operators with exposure to Macau and Asia are hurting after the report of ‘Monthly Gross Revenue from Games of Fortune’ from Macau’s Gaming Inspection and Coordination Bureau. The monthly gross revenue was down 33% in September. This sounds atrocious but it is actually the lowest percentage drop since the cliff-dive drop in February of this year. Accumulated gross revenue was down by 36.2%.

Wynn Resorts, Limited (NASDAQ: WYNN) was down 2.6% at $51.75 in Thursday afternoon trading. Wynn’s consensus analyst target price of $104.38 seems awfully high now, and the stock’s new 52-week low was hit Thursday with a new range for the last year of $50.96 to $192.45.

Las Vegas Sands Corp. (NYSE: LVS) was last seen down 2.8% at $36.88, after hitting a new 52-week low of $36.53. it has a consensus analyst price target of $54.00 and a 52-week high of $65.83.

Melco Crown Entertainment Limited (NASDAQ: MPEL) is somewhat of a pure-play, and it doesn’t even have the strength of Las Vegas to offset its weakness as do Wynn and Las Vegas Sands. Still, its shares were down less than peers by 1.7% at $13.52 in late afternoon trading. It has a consensus analyst target of $23.30 and a 52-week range of $12.80 to $28.17.

The news out of Macau just keeps staying very negative. Seeing a drop off in the decline always seems good on the surface, but the reality is that it is just less-bad.

There seem to be all bad things happening in a short period. China’s economy getting worse and worse is never a good thing for nearby gambling destinations. Thursday’s Macau gaming revenue report just confirms what Fitch warned about a week earlier. Gaming junkets being cut and lower playing and gambling rates  from the extreme wealthy VIPs is bad as well.

One thing is very obvious here—unless casino stocks get several days of big gains, those super-high consensus analyst price targets are going to have to come down handily. As a reminder, most Buy and Outperform ratings in normal market times come with upside projections of 8% to 15% for Dow or S&P 500 stocks.

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