BofA Upgrades Las Vegas Sands And Wynn, Says Coronavirus Cases 'Leveling Out'

Casino stocks with exposure to Macau, China have gotten pounded from the coronavirus, and the Chinese government even shut down Macau casinos for two weeks. However, one analyst said Wednesday the worst of the coronavirus headwinds have now blown over in Macau.

The Casinos Analyst

Bank of America analyst Shaun Kelley upgraded Las Vegas Sands Corp. LVS from Neutral to Buy and raised his price target from $72 to $80.

Kelley also upgraded Wynn Resorts, Limited WYNN and reiterated his $150 target.

The Casinos Thesis

Kelley said the rate of new cases of the coronavirus appears to have leveled out in Wuhan at around 2,500 new cases per day. More importantly for Macau casino operators, the number of new global cases per day appears to have stabilized as well.

Kelley was previously bullish on Macau prior to the coronavirus outbreak and said Wednesday the virus has merely delayed the positive setup for casino stocks by about six months. Kelley cut his first- and second-quarter Macau gross gaming revenue growth estimates to -40% and -50%, respectively.

“However, as previewed in our Year Ahead, we are positive on Macau for 2H20 and into 2021 given 1) signs of improving China macro, 2) a positive gross gaming revenue (GGR) inflection, 3) an improving policy stance toward Macau and 4) potential news on license renewals,” Kelley wrote in the note.

Kelley said Las Vegas Sands and Wynn’s valuations aren't quite at trough levels, but they're attractively valued ahead of what could be a significant upturn in the second half of the year and easy comps heading into the first half of 2021.

For now, the Macau casinos remain closed, but Kelley said their reopening will be the next potentially bullish near-term catalyst.

Benzinga’s Take

Market expectations for February GGR in Macau could not be lower given the casinos will have been shut down for more than half the month. However, if they're back up and running after just 15 days, it will be a major signal that the Chinese government believes the worst of the outbreak is over.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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