Macau, the world’s largest casino gambling hub, reported 29.2 percent gross gaming revenue growth in July, easily topping consensus analyst estimates of 26 percent growth.
However, red-hot Macau gaming stocks Melco Resorts & Entertainment (Nasdaq: MLCO), Wynn Resorts Ltd. (WYNN), Las Vegas Sands Corp. (LVS) and MGM Resorts International (MGM) showed little reaction to the good news as Wall Street experts urged caution heading into the second half of the year.
Macau reported $2.86 billion in gaming revenue in July, up 14.9 percent from a month ago. July marks Macau’s 12th consecutive month of year-over-year gross gaming revenue growth following a two-year downturn in the wake of a government corruption crackdown. The 29.2 percent monthly growth number is the strongest growth Macau has reported since the downturn began in early 2014.
But with shares of all four U.S.-listed Macau casino stocks up between 21 and 45 percent in the past year and difficult comparisons ahead for Macau the second half of the year, the market reaction to the revenue number was muted.
Bernstein analyst Vitaly Umansky says investors should be careful about reading too much into the overall monthly revenue number, which provides no details about VIP gamblers and mass-market trends.
“High hold rates in VIP along with continued volume strength creates volatility and lack of ability to more accurately forecast the monthly trend,” Umansky wrote.
Hold rates refer to the amount of chips held by the casino compared to those held by the gamblers.
“The devil remains largely in the details regarding the breakdown between VIP and mass market and overall share data (which is not available), and as such, the weight of the overall GGR number needs to be taken with a bit of skepticism,” he wrote.
Umansky said Macau gross gaming revenue growth will slow to somewhere between 22 and 25 percent in August.
UBS analyst Robin Farley downgraded MGM Resorts from “buy” to “neutral” on Tuesday, saying that the Macau recovery has already been priced into the stock.
“While the Cotai opening next quarter may also be a catalyst, we believe…
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