Over the last few days, investors have been cashing out of casino stocks.
All as China moves to tighten control of the industry.
According to GGR Asia, “The Macau government wants to increase the share of the mass-market segment in the casino industry, and pledged to implement strict oversight on the allocation of new live-dealer gaming tables. The goals are stated in the draft version of the city’s second Five-Year Development Plan, which was released on Monday for public consultation.”
Not helping, JP Morgan analysts have been bailing on casinos, too.
Analyst DS Kim for example says the latest announcement is enough to de-rate the stocks. Then, analyst Joseph Greff issued downgrades.
According to TheFly.com, “This could have potential implications on gaming patron spend, as well as reduce the casinos’ ability to repatriate Macau free cash flow back to the U.S., The analyst does not like the ‘uncertainty and opacity’ surrounding Macau and China policy. He thinks the uncertainty translates, at least in the near term, to ‘much lower’ multiples for the Macau gaming stocks.”
Despite the news, casino stocks may be worth the gamble.
With the news now out, MGM, LVS, and WYNN are already starting to pivot higher. Look at Las Vegas Sands (LVS), for example. After gapping from about $43 to triple bottom support around $37, the stock is beginning to pivot higher. While its overall chart is nothing to write home about recently, near-term, LVS could at least fill its bearish gap.
The news out of Macau, coupled with downgrades is becoming overkill.
The post With Negativity Priced In, Consider Rolling the Dice of Casino Stocks appeared first on Morningology.
