Has Macau Finally Hit Rock Bottom?
Shareholders of battered gaming companies with exposure to the world’s largest gambling market in Macau, China are certainly glad to see the calendar flip over to 2015. After 2014 started with such promise, the second half of the year ushered in a collapse in gaming revenue due to a handful of coinciding factors.
However, after 2014 went out with a whimper, is the worst of the Macau mess now in the rear view mirror?
Ending On A Low Note
Punctuating an abysmal 2014, December’s Macau gaming revenue number was the worst all year: A more than 30 percent year-over-year drop.
Unfortunately for shareholders of Melco Crown Entertainment Limited (NASDAQ: MPEL), Las Vegas Sands Corp (NYSE: LVS), Wynn Resorts (NASDAQ: WYNN) and MGM Resorts International (NYSE: MGM), December’s numbers were no fluke.
In fact, a graph of 2014’s monthly revenue numbers for Macau (in millions of Macau Pataca) tells a clear story: Year-over-year revenue growth peaked in February, turned negative in June, and continued to plummet through the rest of the year.
Now that it’s a new year, are the woes of 2014 in the past for Macau?
After a string of downgrades for related stocks, Morgan Stanley analyst Praveen Choudhary upgraded Melco to a Buy on Monday morning.
Savvy traders will likely be on the lookout for more upgrades coming soon to measure whether the December disappointment could mark the bottom for Macau.
The next potential catalyst could be Las Vegas Sands' and Wynn’s Q4 earnings reports, which will be released at the end of January.
Disclosure: the author owns shares of Melco Crown Entertainment. Image credit: Global Reactions, Flickr
Latest Ratings for MPEL
|Feb 2017||Morgan Stanley||Upgrades||Equal-Weight||Overweight|
|Jan 2017||Bank of America||Upgrades||Neutral||Buy|
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