Market Overview

Credit Suisse: Macau Gaming 'Likely Not Far From A Bottom'

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According to a recent report, Credit Suisse analysts believe the Macau gaming market is near a bottom. Analysts are recommending investors start slowly building positions in gaming stocks.

After a 6 percent drop in gaming revenue in 2014, Credit Suisse is forecasting a 13 percent increase in revenue in 2015. Analysts see a potential increase in the efficiency of large junkets leading to more VIP gaming in the upcoming year.

Stock Picks

According to the report, Q2 2015 will mark the turning point for Macau-exposed gaming stocks. Credit Suisse rates the stocks of Melco Crown Entertainment (NASDAQ: MPEL) and MGM Resorts International's (NYSE: MGM) MGM China at Outperform. Las Vegas Sands Corp.'s (NYSE: LVS) Sands China, Galaxy Entertainment Group, and SJM Holdings Limited are rated Neutral. Finally, Wynn Resorts, Limited’s (NASDAQ: WYNN) Wynn Macau and Macau Legend are rated Underperform.

A Tough 2014

This past year was tough for the Macau gaming market. A government crackdown on Macau currency law violations and VIP junket operations spooked many wealthy gamblers, and gaming revenue in Macau started to plummet. Weakness in the Chinese economy and political protests also likely contributed to the unwillingness of gamblers to make the trip to Macau from mainland China in the second half of 2014.

Other Analyst Action

Earlier this month, Morgan Stanley upgraded Melco Crown from Equal-weight to Overweight and set a $28 target. In December, FBR Capital reiterated their Outperform rating on MGM and set a $30 target.

Disclosure: the author owns shares of Melco Crown Entertainment. 

Latest Ratings for MPEL

DateFirmActionFromTo
Feb 2017Morgan StanleyUpgradesEqual-WeightOverweight
Jan 2017NomuraUpgradesReduceNeutral
Jan 2017Bank of AmericaUpgradesNeutralBuy

View More Analyst Ratings for MPEL
View the Latest Analyst Ratings

Posted-In: Credit Suisse MacauAnalyst Color Long Ideas Price Target Analyst Ratings Trading Ideas

 

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