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Melco Resorts & Entertainment (NASDAQ:MLCO) was downgraded by Credit Suisse as a Zero-COVID policy and a weakening consumer likely impact results.
“Post 3Q, the gradual e-Visa and packaged tour resumption and slight normalization of Covid-19 policy (post Party Congress) should help drive sequential improvement,” the bank’s analysts wrote. “That said, the drag from lower player quality (on weaker macro), China’s ‘zero-Covid’ policy, and efforts in anti-cross-border gambling remain.”
As such, the bank forecast EBITDA losses across the industry to worsen and gross gaming revenue to fall as visits remain well below 2019 levels. The bank therefore adjusted down earnings estimates and price targets for almost all operators.
“On weak fundamentals but positive news flow, we suggest pair trade and stick with names with higher mass exposure, lower license risk, and less gearing,” the bank’s analysis concluded. “[Las Vegas Sands] (LVS) stays our top pick. Downgrade [Melco] (MLCO) to Neutral.”
Wynn Resorts (WYNN) is also expected to “gain share on mass and VIP luck normalization” as Sands and Galaxy Entertainment (OTCPK:GXYEF) are expected to maintain market shares. Melco (MLCO) shares slid 1.19% on Monday.
Read more on Zero-COVID policy and its impact on Macau’s gambling industry.
Image and article originally from seekingalpha.com. Read the original article here.