Gambling Stock Roundup: Macau Sales Continue To Rise In March, Nevada Falters In February

Last week was quite eventful for the gambling industry with Macau's gaming revenues rising for the eighth consecutive month. This signals that the casino hub is firmly on its path to recovery from the slump stemming from China's anti-graft corruption drive and slow economic growth.

However, the Nevada Gaming Control Board announced a decrease in revenues in the region in February.

In a separate development, National Football League owners approved the Oakland Raiders’ move to Las Vegas.

Recap of the Week’s Most Important Stories

1. Per the Macau Gaming Inspection and Coordination Bureau, gross gaming revenues for March accelerated at the fastest pace in the eight months and rose 18.1% on a yearly basis to roughly $2.65 billion or 21.2 billion patacas.

Looking back, a tough operating environment in Macau weighed on the stock in 2015 and for the most part of 2016. The crackdown on corruption in China compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.

Consequently, this lowered footfall at local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors compounded the woes.

However, Macau's gambling revenues have been rising since second-half 2016 with new resorts attracting high rollers as well as leisure gamblers.

Efforts undertaken by Macau operators to revive revenues by wooing tourists and recreational gamblers with family-friendly resorts and more non-gaming facilities have started yielding results. This is evident from revenue growth in the past eight months.

Though concerns related to the sustainability of revenues from the VIP market linger, it seems that the worst is over for Macau’s gambling industry.

2. According to the Nevada Gaming Control Board, gambling revenues in the state decreased 4.5% in Feb 2017 from the year-ago period to nearly $946 million. This reversed the solid performance in January, after the slump in November and December. More specifically, casino revenues in the Las Vegas Strip – which account for more than half of Nevada’s total revenue – were down 5% year over year in the month. Reno, too, recorded a 6.7% decline in casino revenues.

3. The Oakland Raiders’ shift to Las Vegas is likely to make the tourism industry in Las Vegas even more lucrative, which should resultantly drive growth in the gambling industry.

Nevada has approved $750 million in public money to build a new $1.9 billion state-of-the-art, 65,000-seat stadium in Las Vegas for the franchise for the 2020 season. Notably, funding of $650 million is likely to come from Bank of America Corp. (NYSE:BAC) , while the Oakland Raiders will contribute $500 million for the same.

The move, though with its own set of challenges, is anticipated to draw a new base of football fans to the gambling mecca, thereby boosting attendance at casinos and resorts.

Price Performance

The following table shows the price movement of the major gambling stocks over the past week and the last six months:

Over the last five trading sessions, share price movement of the major gambling stocks was mostly encouraging. Caesars Acquisition Company (NASDAQ:CACQ) gained the maximum of 5.8% followed by MGM Resorts International (NYSE:MGM) and Boyd Gaming Corp.’s (NYSE:BYD) rise of 3.1% each. However, Melco Crown Entertainment Ltd. (NASDAQ:MPEL) lost 2.6%.

Moreover, over the last six months, the price performance of gambling stocks was predominantly positive. Among the stocks that appreciated the most were Caesars Acquisition Company and Monarch Casino & Resort Inc. (NASDAQ:MCRI) that gained 24.5% and 18.1%, respectively. On the contrary, Las Vegas Sands Corp. (NYSE:LVS) recorded a decline of 3.1% over the same time frame.

What’s Next in the Gambling Space?

We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect this volatility to continue in the coming days.

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