Casino stocks with exposure to Macau have all fallen sharply over the past
month as investors fear a slowdown in gaming in Macau. MGM Resorts (MGM) is down 17.5% over the past month, Wynn (WYNN) is off 16.5% and
Las Vegas Sands (LVS) down 14.5%.
Along with fear of a slowdown in Macau, gaming revenue on the Las Vegas strip fell 14.9% in March. I
believe this decrease in strip gaming revenue is largely the result of this
being an off year at Conexpo/ Last year more than 120,000 people came to Las Vegas for this show in March. Even
with the declines in March gaming revenue on the strip is still up 3% this
fiscal year. High gas prices also likely negatively impacted gaming revenues,
and the decline in gas prices going into summer should be encouraging for Las
Vegas.
Boyd gaming (BYD) is down 10% over
the past month, the company has strong Las Vegas and regional exposure, but no
exposure to Macau. Regional casino operators Penn National Gaming (PENN) and
Ameristar Casinos (ASCA) are unchanged
over the past month. Melco Crown Entertainment (MPEL),
operating only in Macau is down 20% over the past month.
These results over the past month paint a clearer picture of how investors
view the gaming space. With the market most worried about a slowdown in Macau,
and some concern about the strength of the Las Vegas recovery. In Macau gaming
revenues were still up 22% in April, and will gains in Macau are not as high as
they once were it is important to note this is coming from a much higher base
then a year or two ago. Macau in still in the early stages of devolvement, and
transportation improvements to Macau should keep growth strong for years to
come.
MGM, Sands, and Wynn all could be finding support near current levels. MGM
responded well around $10.30 a share, a place of previous resistance. Wynn also
appears to have found support just above $100 per share, holding the $100 per
share level could prove to be a catalyst for the stock. LVS appears to be
finding at least a temporary bottom; however I am worried about the stock
returning to trading range, between about $36 and $50 that it was stuck in all
last year.
I believe the fall in these stocks could be presenting you an opportunity to
get long these stocks. Over the next year, improvements in Las Vegas, and growth
in Macau should lift these stocks. I still believe MGM Resorts is the best play on the Las Vegas recovery,
while still giving you some exposure to Macau.
Data sourced from: finviz.com.
Disclosure: I have no positions in any stocks mentioned, but
may initiate a long position in MGM over the next
72 hours.
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