Investing

Why Citigroup Is Feeling Lucky on These Casino Stocks

Chris Lange

Published: July 8, 2022 9:56 am

Last Updated: July 8, 2022 10:04 am

Casino stocks were a staple of many portfolios for years, and with the expansion into Macau, China, they were considered a cash cow. However, COVID-19 proved problematic with lockdowns in China and globally. With the pandemic abating and everyone getting back to business as usual, one big brokerage house from Wall Street is betting big again on these casinos.

Citigroup has issued a few calls with a focus on big casinos. Each call is incredibly positive, forecasting massive upside in both the near and long term.

George Choi was the lead analyst on the call, and he made the point that most investors seem to be willing to look past the recent COVID-19 outbreak in Macau and have regained confidence in the eventual EBITDA recovery in Macau. He attributes the positive sentiment change to the “much-lower-than-anticipated regulatory risks” after the Legislative Assembly’s passing of the Gaming Law amendments in June.

Also, China’s decision to half the mandatory quarantine days for inbound travelers “also gets investors excited again,” according to Choi. In the near term, he thinks the license retender, likely to happen in August, could be the next positive catalyst to rerate the Macau stocks “to the next level.”

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Las Vegas Sands Corp. (NYSE: LVS): Citigroup reiterated a Buy rating and slightly lowered the price target from $57 to $56, implying upside of 61% from the most recent closing price of $34.76. The stock traded around $35 on Friday, in a 52-week range of $28.88 to $52.00. Shares are down over 8% year to date.

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Melco Resorts & Entertainment Ltd. (NASDAQ: MLCO): Citi reiterated a Buy rating and lowered the $12.50 price target to $11, implying upside of 87% from the most recent closing price of $5.89. The stock has a 52-week trading range of $4.06 to $16.58, and it traded at over $5 a share on Friday. The stock is down 48% year to date.

MGM Resorts International (NYSE: MGM): Citi reiterated a Buy rating and lowered the price target from $59 to $56, implying upside of 84% from the most recent closing price of $30.36. The stock traded around $30 on Friday, in a 52-week range of $26.41 to $51.17. Shares are down over 34% year to date.

Wynn Resorts Ltd. (NASDAQ: WYNN): Citi reiterated a Buy rating and lowered the $92 price target to $87.50. The implied upside from the most recent closing price of $57.79 is 51%. The stock traded around $57 on Friday, in a 52-week range of $50.20 to $117.88. Shares are down over 34% year to date.