Casino stocks surged Thursday after hints of economic stimulus from China raised hopes for a rebound in gambling mecca Macau, which saw revenue growth slow to a crawl last month. Meanwhile Caesars Entertainment (CZR) surged after hours when it posted an unexpected profit and announced the forthcoming exit of CEO Mark Frissora.
XGross gaming revenue in Macau grew 2.6% in October to 27.3 billion patacas ($3.4 billion), down from 2.8% growth in September, when results were affected by a typhoon, and below analysts' estimates for 3.5% growth.
But on Wednesday, China's communist Politburo noted downward pressure is increasing on the economy, adding that the government needs to take timely steps to counter it, according to Bloomberg
Meanwhile, the latest results from Nevada show gaming revenue ticked up 1.26% to $991.2 million in September, the state Gaming Control Board said Tuesday. However, Las Vegas Strip revenue declined 3.7% to $546 million.
Casino stocks with Macau exposure jumped on the stock market today, with Wynn Resorts (WYNN) up 12%, Las Vegas Sands (LVS) 122%, MGM Resorts (MGM) 4.6%, Melco Resorts & Entertainment (MLCO) 12% and recent IPO Studio City (MSC) nearly 17%.
Golden Week A Bust For Macau
October is considered a peak month for the region, with the Golden Week Holiday usually acting as a catalyst for higher gaming revenue. And Chinese tourist arrivals to Macau for the holiday were up 14% from a year earlier.
However, Union Gaming analyst Grant Govertsen said VIPs are now a smaller percentage of gamblers, which means holiday months will show less dramatic results for casino stocks.
"With this in mind, and considering that VIP last year not only represented a greater mix of gross gaming revenue, but was also growing faster than mass, this resulted in a particularly tough situation beyond the headline +22% comp," Govertsen said in a research note.
He also claimed many Chinese preferred to go to the U.S. or Europe this year, as the timing of the earlier Mid-Autumn Festival allowed them to take one longer holiday. The analyst also said a visit to the region by President Xi Jinping hit revenue. This was for the opening of the Hong Kong-Zhuhai-Macau bridge, which could act as a business booster for the region and casino stocks going forward.
Govertsen believes the month ahead will be better for betting investors.
"The November calendar is favorable with one additional Friday and we are currently forecasting 8% growth, to 25.0 bn (patacas)," he said. "For the whole of 4Q18 we are forecasting 7% growth. This implies full-year growth of 14%. For 2019 we expect mid/high single digits, or broadly speaking, a GDP story."
Penn Misses, Market Hails Caesars
Meanwhile, U.S.-focused Penn Gaming (PENN) reported that EPS jumped 41% to 38 cents, missing views by 5 cents, as revenue slipped 2% to $790 million, or $18 million short of Wall Street expectations.
The firm also nearly halved its full-year net income forecast to $86.7 million from an earlier forecast of $164.1 million. However, it raised revenue guidance to $3.58 billion from $3.21 billion.
Penn Gaming stock was down 1.65% Thursday. Its relative strength line has been on a downward trend since May, while it remains below both its 50- and 200-day moving averages.
And Caesars Entertainment stock surged 10% late on when the casino operator reported an unexpected profit. It posted Q3 earnings per share of 14 cents, defying forecasts for a 3-cent loss, according to Zacks Investment Research. Revenue exploded 122% to $2.19 billion, which was in line with expectations.
Caesars Entertainment also announced the departure of CEO Mark Frissora. He is set to leave Feb. 8, and a committee has been established to find a successor.
They follow hot on the heels of MGM Resorts, which reported earnings Tuesday. MGM's earnings per share bested views by 6 cents, even as EPS slipped 27% to 24 cents. Revenue also beat after it spiked 7% to $3.03 billion.
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The post Casino Stocks Jump On China Hopes, Market Hails Caesars appeared first on Investor's Business Daily.
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