Casino stocks cooled down on Tuesday after big Monday rallies following news that China has lifted quarantine restrictions on travel from the mainland to China’s gambling hub in Macau.
On Monday, Bank of America analyst Shaun Kelley said the move is a significant step towards normalizing the Macau market, but casino stocks are still facing severe near-term headwinds.
What To Know: Starting on Wednesday, visitors crossing between Guangdong and Macau will no longer be subject to a 14-day quarantine period. Instead, visitors can pass freely to and from Macau if they have tested negative for COVID-19 within seven days.
Kelley said Guangdong is a major source of traffic for Macau and accounts for 45% of all mainland visitation.
However, Kelley said visa restrictions remain in place, and international visa visitation accounts for roughly half of Macau’s visitation from the mainland.
Gross gaming revenue in Macau was down 96% in the second quarter, in large part due to travel restrictions in China. Kelley said investors will get a better picture of the potential recovery in Macau once all major restrictions are lifted.
How To Play It: Kelley said the elimination of the quarantine period will likely benefit VIP gamblers the most, making Wynn Resorts, Limited (NASDAQ: WYNN) the biggest potential winner from the news.
“Net net, this news is very positive for our Macau stocks and is the first meaningful step toward a recovery, while further easing around visas and Hong Kong could provide additional positive catalysts,” Kelley said.
Bank of America has the following ratings and price targets for Macau casino stocks:
- Wynn Resorts, Buy rating, $95 target.
- Melco Resorts & Entertainment Ltd (NASDAQ: MLCO), Buy rating, $20.20 target.
- Las Vegas Sands Corp. (NYSE: LVS), Buy rating, $61 target.
- MGM Resorts International (NYSE: MGM), Underperform rating, $15 target.
Benzinga’s Take: Macau casino stock investors will now be waiting for further headlines easing visa and other travel restrictions to and from Hong Kong. In the U.S., investors will be monitoring elevated cases of COVID-19 in Nevada and additional openings and closures on the Las Vegas Strip.
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