Gaming stocks were not particularly pleased Tuesday and Wednesday when Macau reported revenues under what analysts were expecting. Two analyst reports from top firms explain the drop and what the outlook is for the future. This is on a day that the broader markets were showing a positive post-election bump as well.

Tuesday morning, the Gaming Inspection and Coordination Bureau, or DICJ, released Macau market gross gaming revenue (GGR) growth for October as -23.2% year-over-year, missing expectations of -20% to -22%. Mass table revenues were -8%, which was the first negative comp since July 2009 and below the average of +16% growth in the past three months.

The smoking ban that was put in place earlier and the reclassification of tables could have contributed to some of the mass weakness.

Merrill Lynch believes the revenues for early November are soft, considering two of the past four days were on the weekend and, combined with the past five days of October, still suggest that the market has not yet stabilized. As a result, Merrill Lynch lowered its 2014 and 2015 GGR growth forecast to flat, noting some downside risk and additional risk to company estimates given the soft October mass results.

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Merrill Lynch mentioned some of the major casinos in its report:

Las Vega Sands gained +200bps of total market share m/m in October, for a 23.7% share on high VIP hold and relatively good mass results. Gains were driven by a +80bps m/m increase in VIP hold (+120bps ahead of the market average for Oct). Las Vegas Sand’s VIP volume growth was relatively soft, at -43.7% Y/Y vs. the market decrease of -29.1% Y/Y. LVS’s mass table share was also up +300bps m/m, with a -4.9% yr/yr decrease in revenue better than the market’s -8.0% y/y growth rate.

MGM’s GGR market share was down -290bps m/m, to 8.2%, entirely on low VIP hold. MGM’s VIP hold was down -130bps m/m and was also -130bps below the market average. MGM was the only operator to grow mass revenues in October (+16.1% Y/Y vs. market -8.0%). Wynn saw a -190bps m/m decrease in total market share, to 8.9%, on low hold and soft mass results. VIP hold was down -40bps m/m and -50bps below the market average. Wynn’s mass table share dropped -185bps m/m, as mass revenues were down -17.4% Y/Y vs. the market -8.0%.

Sterne Agee also made a call on Macau as well, to the same tune as Merrill Lynch. VIP table revenue declined 30.8% which compared to its estimate for high-single digit mass growth and a mid-30% VIP table revenue decline. The firm’s understanding is that the main variance versus its projection mostly stems from casino operators designating a portion of premium mass tables to VIP.

Sterne Agee commented on the casino operators:

We believe operators have worked to re-designate certain premium mass stables to VIP in order to comply with recently implemented smoking restrictions to the mass floor. Smoking is still allowed in VIP rooms, while the mass floor has gone smoke free. In our view, premium mass revenue is responsible for outsized mass gross gaming revenue (win), although volume represents only ~15% to ~20% of the mass market (the “80/20 rule”). We believe it is important to note that premium mass margins were left unchanged by the re-designation (outside of a higher annual fee per table paid for a VIP classification versus mass).

Macau GGR continues to be the most negatively impacted by China’s anti-corruption campaign, which may precipitate the disruption of the VIP and premium mass results. A poor mass revenue result may mark the low point of potential negative investor sentiment, and the “wait period” to buy or “buy the dip” period we are currently in improves over time, in Stern Agee’s view.

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Melco Crown Entertainment Ltd. (NASDAQ: MPEL) saw its shares fall 4% to $24.42 with three hours left in regular trading. Over the past two days, the stock has fallen 8% from Monday’s close. The stock has a consensus analyst price target of $38.58 and a 52-week trading range of $23.50 to $45.70.

MGM Resorts International (NYSE: MGM) saw its shares fall almost 2% to $21.90 with three hours left in regular trading. Over the past two days, the stock has fallen almost 5% from Monday’s close. The consensus analyst price target is $29.38, and the 52-week trading range is $18.40 to $28.75.

Wynn Resorts Ltd. (NASDAQ: WYNN) saw its shares fall more than 3% to $179.00 with three hours left in regular trading. Over the past two days, shares have fallen about 5% from Monday’s close. The consensus price target is $216.42, and shares have traded in range of $157.48 to $249.31 in the past year.

Las Vegas Sands Corp. (NYSE: LVS) shares fell 2% to $58.39 with three hours left in regular trading. Over the past two days, the stock has fallen over 6% from Monday’s close. It has a consensus analyst price target of $73.65, and the 52-week trading range is $57.65 to $88.28.

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