As goes Macau, so goes casino stocks. That has been the trend this decade for casinos with any exposure to Macau, which is considered by many to be Asia’s far-bigger version of Las Vegas. When things in Macau are going well, casino stocks are in rally mode. When things in Macau aren’t going well, casino stocks struggle.
It’s really that simple.
In the early part of the decade, Macau was on fire. Between 2010 and 2013, gaming revenues in Macau were rising by 20%, 30%, 40% and more. Casino stocks were consequently roaring higher.
This strength persisted in the first half of 2014. But, a shift in regulation started a big Macau slowdown in the second half of 2014, and 20%-plus growth rates turned into year-over-year declines. Not surprisingly, casino stocks dropped.
The casinos dropped again in 2015 when regulation shifts continued to weigh on Macau traffic and gaming revenues fell 30%. In 2016, Macau gaming revenues were still negative, but improving, and casino stocks started to climb back. Then, in 2017, Macau gaming revenues returned to growth in a big way (+19%), and casino stocks roared higher.
Now, in 2018, the Macau rebound has lived on. While casino stocks are largely up on the year, they have given back some of those gains as the Macau rebound has slowed in the summer. Year-over-year gaming growth rates slowed to sub-15% in May, June and July, versus 20%-plus increases through the first four months of the year.
August, however, was strong. Gaming revenues rose 17%. Thus, if recent Macau strength can persist into the end of the year, casino stocks should rally in a big way.
With that in mind, here’s a list of four casino stocks with Macau exposure that are worth keeping an eye for the next several months.
Casino Stocks to Watch: Wynn Resorts (WYNN)
Major casino operator Wynn Resorts (NASDAQ:WYNN) could bounce higher in a big way if Macau gaming revenues continue to impress.
Wynn has their footprint all over Macau. They operate three major resorts through Wynn Macau, Encore and Wynn Palace. Moreover, just under 75% of Wynn’s total revenues last year came from Macau.
Thus, the saying “as goes Macau, so goes casino stocks” is especially true for WYNN stock.
This stock dropped from $240 to below $70 when the Macau slowdown hit from 2014-16. Then, it rebounded to nearly $200 earlier this year as Macau bounced back.
Therefore, if Macau revenues can continue to impress into the end of the year, WYNN stock should naturally be a big winner.
Casino Stocks to Watch: Las Vegas Sands (LVS)
Another casino stock, which is highly dependent on Macau is Las Vegas Sands (NYSE:LVS).
Las Vegas Sands has a very large presence in Macau. The company operates multiple resorts in Macau, including the Venetian Macao, Sands Cotai Central, the Parisian Macao, the Four Seasons Macao, and Sands Macao. Together, those five resorts account for nearly 70% of total casino revenue at LVS.
As such, much like WYNN stock, LVS stock is highly dependent on Macau. During the Macau downdraft from 2014 to 2016, LVS stock dropped from $85 to $40. During the Macau resurgence from 2016 to 2018, LVS stock rebounded back to $80.
Therefore, if Macau gaming revenues can continue to impress into the end of the year, LVS stock should naturally roar higher.
Casino Stocks to Watch: MGM Resorts (MGM)
While Wynn and Las Vegas Sands have huge Macau reliance, MGM Resorts (NYSE:MGM) has much less Macau reliance due to smaller exposure to Asia’s casino hub.
MGM operates just two large properties in Macau: MGM Macau and MGM Cotai. Meanwhile, the company has a huge footprint in Las Vegas. As such, MGM’s Macau properties accounted for less than 20% of both revenues and adjusted EBITDA last year.
Because of this lower revenue dependence on Macau than WYNN and LVS, MGM stock hasn’t really experienced the wild swings that WYNN and LVS stock have due to variances in Macau gaming revenue. That being said, this stock still does tend to trade better when Macau is doing well versus when Macau is not doing well.
For example, MGM stock dropped from $25 to $19 during the 2014-16 Macau downdraft and roared from $19 to $36 during the 2016-18 Macau resurgence.
Therefore, for investors looking for lower-risk exposure to a Macau rebound into the end of the year, MGM stock is the best choice.
Casino Stocks to Watch: Melco Resorts (MLCO)
Unlike the other casino stocks on this list, Melco Resorts (NASDAQ:MLCO) is essentially a pure-play on Macau.
Melco is a developer, owner, and operator of casino properties in Asia. In other words, there is no Las Vegas presence. The company’s three major Macau properties (City of Dreams, Altira Macau, and Studio City) drive a bulk of this company’s revenues and profits.
Therefore, when it comes to Macau dependability, MLCO stock is king. During the 2014-16 Macau downdraft, MLCO stock dropped from $40 to $10. During the 2016-18 Macau resurgence, MLCO stock went from $10 to over $30.
Now, MLCO stock sits at $23. But, Macau had a strong August, and year-to-date revenues are still 20% of their 2014 highs. Thus, if the rebound in Macau continues and gaming revenues regain their 2014 highs, MLCO stock could bounce back to 2014 highs, too. That would imply a near 100% move higher from here.
As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.