Following two years of headwinds, Macau stocks are likely to outperform in 2022, and Melco Resorts & Entertainment Ltd MLCO is poised to benefit from the easing of travel restrictions and license renewals, according to Morgan Stanley.
The Melco Resorts & Entertainment Analyst: Praveen Choudhary upgraded the rating for Melco Resorts & Entertainment from Equal-Weight to Overweight, while raising the price target from $11 to $13.
The Melco Resorts & Entertainment Thesis: Gross gaming revenue (GGR) is likely to grow by 41% in 2022, Choudhary said in the upgrade note.
“Macau stocks tend to move with GGR growth momentum, and it should drive 2022 outperformance (similar to 2016),” the analyst mentioned. “HK/Mainland border is expected to reopen (without quarantine) for up to 1,000 business travelers per day, which we expect to happen by this year-end or early 2022,” he added.
Melco Resorts & Entertainment has a local operator status, which “should continue to be viewed positively by the market before the regulatory overhang gets removed,” Choudhary wrote while mentioning that the company also has exposure to the faster-recovering gaming markets of the Philippines and Cyprus.
MLCO Price Action: Shares of Melco Resorts & Entertainment are down 0.61% to $9.71 at the time of publication Tuesday morning.
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