Shares of U.S.-listed Macau casino operators traded mostly higher on Monday after each was awarded new 10-year concessions over the weekend to continue operating.
What Happened? The six legacy Macau casino operators were each awarded new gaming concessions, or licenses that will begin on Jan. 1, 2023. Uncertainty surrounding Macau concession renewal has been one of several key overhangs for Macau casino stocks in 2022.
Related Link: JPMorgan Boosts Price Targets On These Casino Stocks
Macau casino stocks that trade in the U.S. include:
- Las Vegas Sands Corp. LVS
- MGM Resorts International MGM
- Wynn Resorts, Limited WYNN
- Melco Resorts & Entertainment Ltd MLCO.
Melco led the rally with a 6.8% gain followed by Wynn with a 2.6% gain.
Why It's Important: On Monday, Bank of America analyst Shaun Kelley raised his price targets for Macau operators and said the concession news will help improve investor sentiment. Unfortunately, the latest wave of COVID-19 outbreaks, government-ordered lockdowns and anti-government protests in China will likely continue to weigh on valuations in the near-term, Kelley explained.
"While the sector specific news is positive, China reported its fourth consecutive day of record COVID cases, with Chongqing and Guangzhou (relatively close to Macau) representing most new infections," Kelley said.
In light of the concession renewal news, Bank of America made the following changes to its coverage:
- Las Vegas Sands, Neutral rating, price target raised from $37 to $44
- MGM, Neutral rating, price target raised from $36 to $37.
- Wynn, Neutral rating, price target raised from $72 to $76.
Benzinga's Take: The concession renewals are good news for Macau casino stocks, but Macau remains a high-risk speculative investment at this point given COVID-19 uncertainty and regulatory crackdowns on U.S.-listed Chinese stocks by both U.S. and Chinese lawmakers. Macau has tremendous long-term growth potential, but only if the businesses are allowed to open fully and their customer bases are allowed to travel freely.
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