Macau casino stocks have taken a beating so far in 2022, but the selling pressure has intensified in recent days. On Tuesday, Bank of America analyst Shaun Kelley highlighted at least four reasons investors are dumping Macau stocks.
Reasons For The Sell-Off: For the past year, Kelley has repeatedly discussed the "three C's" weighing on Macau stocks: concession renewals, crackdowns by regulators and COVID-19. In the month of March, Kelley said there are four primary concerns for Macau investors:
- A new lockdown in Shenzhen has been implemented following a surge of COVID-19 cases in the Chinese mainland.
- There has been a large COVID-19 outbreak in Hong Kong that includes 30,000 cases and 300,000 people quarantined.
- There are renewed concerns over the potential delistings of U.S.-listed Chinese ADRs.
- Broader geopolitical tensions among the U.S., Europe, Russia and China have investors concerned about additional economic fallout from Russia's invasion of Ukraine.
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"Recent developments have added ongoing concern from China’s zero tolerance COVID policy, and we believe investors will start to question whether a significant improvement in operating conditions in 2H ’22 is achievable," Kelley said.
While U.S. casino operators in Las Vegas have bounced back and are now exceeding pre-pandemic 2019 gross gaming revenue levels, the latest Macau revenue numbers from the week ending March 9 are now down between 80% and 85% from 2019 levels and down 50% from February levels thanks to the most recent outbreak.
U.S. regulators also recently named five Chinese ADRs at risk of being delisted if they don't comply with new accounting standards, developments that have weighed on shares of all major Chinese ADRs.
Price Action: Here's how shares of major U.S.-listed Macau operators have performed so far in the month of March:
- Wynn Resorts, Limited (NASDAQ:WYNN) is down 22.7%.
- Las Vegas Sands Corp. (NYSE:LVS) is down 25.1%.
- Melco Resorts & Entertainment Ltd (NASDAQ:MLCO) is down 39.2%.
Benzinga's Take: There is no doubt Macau and Macau casino operators have tremendous long-term upside potential. The question U.S. investors must ask themselves at this point is whether or not Chinese stocks are completely uninvestable as both U.S. and Chinese regulators continue to crack down on Chinese companies.
