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Casino stocks: Wynn, MGM, L.V. Sands rise after Macau renewed licenses

Yahoo Finance Live anchors discuss the moves in casino stocks after Macau license renewals.

Video transcript


BRIAN SOZZI: Welcome back. We're coming up against that opening bell on Wall Street to kick off this jobs report week. Let's take a look at some stocks moving on the Yahoo Finance platform. First up, casino shares in focus after the Macau government renewed the licenses for six casino operators, including resorts from Wynn, MGM, and Las Vegas Sands.

The new licenses are expected to take effect at the beginning of next year and are allowed to carry a maximum term of 10 years according to Macau's gaming law. JP Morgan out with a flash deal on this one, guys, saying this could be a big catalyst for the stocks. They're recommending pretty much buy ratings across the board for the space as a result of this.

BRAD SMITH: Yeah, we've seen tremendous growth in terms of post pandemic period where there has been more attention that's been thrust towards gaming, whether that be digitally or whether that be the in-person experience, and particularly for some of the resort operators as we're seeing even this kind of shift in traveler sentiment and how they are spending more money on those experiences versus goods, at least cyclically right now.

You wonder where that could continue to move forward or at least kind of set a new benchmark rate that some of the casino operators could count on. But we do know that negotiations-- they're going to continue with some of the winners that got the final contracts. And then also they've got to have some type of investment in nongaming sectors as well, which is going to be an interesting kind of tidbit of this.

JULIE HYMAN: Yeah, I mean, it was pretty expected that they would get this still. It was sort of an overhanging uncertainty. And it's so interesting how these stocks trading today stands in stark contrast-- where this positive sentiment stands in stark contrast to what we're hearing from the mainland. But to put it in perspective here, gaming revenue in Macau is down to a record low of $49 million in July. That is a 98% decline from pre-COVID levels.

And part of the reason is that Macau is so dependent on the Chinese mainland. That's where most of the visitors who come there come from. Chinese-- gambling is still illegal in mainland China. It is not illegal in Macau obviously. And this-- now these new license renewal promises now guarantee that it is going to remain legal in Macau for now at these various casinos.

So you know, it's a big deal that they're able to do this. But they're also trying to diversify where the travelers come from to come to Macau. And you know, that'll be an interesting challenge going forward to see if they can attract people from other places.

BRIAN SOZZI: This would have been a disaster if they didn't get these license renewals.

JULIE HYMAN: Yes, yes.

BRIAN SOZZI: These companies have invested billions of dollars over the past decade to put large hotels and properties and tables in these areas. And clearly they needed this.

BRAD SMITH: Yeah, Macau gets cited time after time, especially in the earnings calls for companies like Wynn. Wynn actually talking about that within their most recent earnings call as well, saying that the market continues to be challenging, of course, that the current environment. However, these contracts certainly give them some [? leeway ?] going forward from here.

They're saying that the unique tourism offering during periods when the market is accessible really is highlighting some of that strong demand that they are forecasting and foreseeing, which really dovetails into how they go about getting these contracts and the competitive environment for making sure that they do get that 10-year time period too. So we'll see exactly where they're able to start to enact some of that as the negotiations start to finalize as well here.