After registering 25 consecutive months of year-over-year gross gaming revenue (GGR) declines, early numbers out of Macau for the month of July suggest the gaming hub could be on pace to deliver its first revenue growth in more than two years. However, JPMorgan is not impressed.
Analyst Joseph Greff has slashed the firm’s 2016 outlook for Macau and cut its price targets for Wynn Resorts, Limited WYNN and Las Vegas Sands Corp. LVS.
“We now assume a 5 percent sequential decline in mass and slot gaming revenue, though our estimate for VIP gross gaming revenue is unchanged and assumes a 26 percent year-over-year decline (assumes normal VIP hold versus above normal comparison in the 2Q15 at 3.38 percent) and a sequential decline of 13 percent (against a tough, high VIP hold comparison of 3.26 percent),” Greff explained.
Overall, he remains mostly neutral on Macau from this point forward, even noting, “We still see a path for WYNN to grow EBITDA, EPS and free cash flow per share attractively over the next five years, and because of this, longer-term investors may opt to stand pat.”
He also mentioned that Sands’ 6.3 percent dividend is likely safe and provides a floor for the share price.
For now, JPMorgan has downgraded Wynn from Overweight to Neutral and cut its price target from $101 to $94.
The firm maintains a Neutral rating on Las Vegas Sands, but has cut its price target from $52 to $47.
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