Macau Stocks Steady Heading Into 2021, Analyst Hikes Targets on LVS, MGM, Wynn

Posted on: December 21, 2020, 08:57h. 

Last updated on: December 21, 2020, 10:13h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands (NYSE:LVS), MGM Resorts International (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN) are the domestic gaming companies with Macau footprints. To say that trait has been problematic in 2020 is underplaying the matter.

Macau stocks
MGM Grand Macau. An analyst is bullish on Macau operators for 2021. (Image: Associated Press)

With the calendar soon turning to 2021 and green shoots emerging in the world’s largest casino hub, analysts are increasingly bullish on operators with significant Macau exposure. They note slack 2020 performances coupled with muted investor expectations could set the stage for rallies next year.

While the recovery time line around Macau remains an unknown, we continue to believe in the long-term resiliency of the market, and believe it’s a matter of when, not if, the market returns to normal/accelerated levels,” said Stifel analyst Steven Wieczynski in a note to clients.

Owing to Beijing’s efforts to quash cross-border money transfers, VIP visitation to the special administrative region (SAR) remains low. It’s a scenario that’s expected to linger into the new year. But market observers believe mass and premium mass gamblers can power a Macau rebound.

There’s some evidence that’s already happening. Macau’s November gross gaming revenue (GGR) of $844 million, though glum on a year-over-year basis, represents a dramatic sequential improvement following months of declines of at least 90 percent.

Plenty of Room for Upside

Recently, the broader complex of gaming equities is rallying, as the first coronavirus vaccines come to market, potentially setting the stage for some semblance of travel and leisure normally in the back half of 2021.

Still, shares of LVS, MGM and Wynn are lower by an average of almost 13 percent year-to-date, while the S&P 500 is higher by 14.70%. That scenario could imply the US-based Macau operators have room to run in 2021, and Stifel’s Wieczynski sees several tailwinds driving that potential upside.

“First, investor expectations around Macau remain muted. However, we believe consensus estimates are reasonable and this, in turn, should allow investors to get more comfortable with Macau-centric names, as they won’t have to endure multiple negative estimate reductions moving forward,” said the analyst. “Second, from here, we expect to witness sequential improvements in the Macau market, which should drive investor interest higher in the near-term.”

He adds new money could flow into the likes of MGM, Sands, and Wynn as more investors buy into the notion that the darkest clouds are no longer hovering over these names.

Nice Price Target Increases

One positive to emerge from the pandemic is that it’s forcing gaming companies to operate leaner business models, where cost controls and margins are prioritized, and that’s to the benefit of long-term investors.

On that note, Wieczynski sees the aforementioned trio of casino equities offering stout upside potential in 2021. The analyst boosted his price forecast on LVS, the largest Macau operator, to $73 from $60, well above last Friday’s close at $57.43.

He took his projection on MGM, which runs two Macau integrated resorts, to $34 from $23, while lifting his target on Wynn to $130 from $100. MGM and Wynn trade around $30 and $110, respectively, at this writing.