Stock Analysis & Ideas

2 Casino Stocks to Consider as Macau Eases COVID Restrictions

Story Highlights

WYNN and LVS stocks jumped on easing pandemic-led restrictions in Macau. Both these companies have significant operations in Macau, and a recovery in tourism could give them a major boost to their financials.

Shares of casino operators Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) spiked about 12% following the news that Macau, a Special Administrative Region of China, is easing COVID-led restrictions and will soon allow visitation. 

Easing Restrictions Is a Positive

This is a sigh of relief for Wynn Resorts and Las Vegas Sands. Notably, Macau is a gambling hub and a significant source of revenue for these companies. The strict COVID restrictions led to a plunge in tourism, thereby impacting the revenue and profitability of these companies. 

For instance, Las Vegas Sands’ revenue from Macau operations fell 43% in the first six months of 2022. Meanwhile, the segment reported an adjusted EBITDA loss of $121 million during the same period. 

As for Wynn Resorts, its revenues from Macau operations fell about 68% in the second quarter due to travel-related restrictions, COVID-19 testing, and other mitigation processes. Meanwhile, the segment reported an operating loss.

As both these companies generate a significant amount of revenue from Macau operations, easing restrictions will likely boost their financials significantly. Following the update, Jefferies analyst David Katz upgraded WYNN and LVS stocks to Buy and expects a rerating of these shares. 

Meanwhile, Citigroup analyst George Choi reiterated his Buy recommendation on both these stocks. 

Is Wynn a Buy or Sell? 

On TipRanks, WYNN stock has a Moderate Buy consensus rating based on six Buy and five Hold. Further, WYNN’s average price target of $84.20, implies 26.1% upside potential.

However, with hedge funds and retail investors selling its stock, WYNN has a Neutral Smart Score of six out of 10. Hedge funds sold 297.3K WYNN shares last quarter. Meanwhile, TipRanks’ data shows retail investors lowered exposure to WYNN stock by 1% in 30 days.

Is LVS a Buy or Sell?

LVS stock sports a Strong Buy consensus rating on TipRanks based on 10 Buys and one Hold. Further, these analysts’ average price target of $48.50, implies 22.3% upside potential.

While analysts are bullish about LVS stock, it has negative signals from retail investors. TipRanks’ data shows retail investors lowered exposure to LVS stock by 1.1% in the last 30 days. LVS stock has a Neutral Smart Score of five out of 10.

Bottom Line 

The easing of pandemic-led restrictions is indeed a positive development for WYNN and LVS. Both these companies’ financials will likely get a significant boost from the recovery in their Macau operations. However, macro weakness and uncertainty could play spoilsport.

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