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Macau positivity filled casino earnings calls in early May — and analysts at Barclays expect the optimism to continue.
“This isn’t the end of Macau’s moment,” Barclays US Gaming Leisure & Lodging analyst Brandt Montour wrote in a new note on Wednesday
Montour upgraded Wynn Resorts (WYNN) from Equal Weight to Overweight and increased its price target from $120 to $135. The firm is bullish on the casino operator thanks to a resurgence in Macau coupled with growth in Las Vegas.
Shares of Wynn popped more than 6% on Wednesday while fellow Macau operators, Las Vegas Sands (LVS) and MGM (MGM), also traded higher.
Barclays is now overweight all three major Macau operators, including Wynn, Las Vegas Sands, and MGM Resorts International
“Evidence is accruing that WYNN’s Macau business is heading for 2019 EBITDA generation faster than we (or we think anyone) thought, and soon we could be talking about 'how much above 2019' Wynn Macau can recover to,” Montour wrote in a note to clients.
In the first quarter of this year, Wynn reported $600.1 million in operating revenue for its Macau segment, the highest quarterly report since the fourth quarter of 2019. Las Vegas Sands more than doubled its Macau revenues from 2022, posting first-quarter revenue of $1.28 billion in the region. Similarly, MGM Resorts China segment saw quarterly revenue increase 140% from the year prior.
"Macau is coming back quickly," Wynn Resorts CEO Craig Billings said during the company's earnings call on May 9.
But the closely watched region that's lagged due to COVID-19 disruptions in China isn't back to normal yet. MGM noted its first-quarter adjusted EBITDAR [earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs] represented an 88% recovery to where it was prior to the first quarter in 2019.
Part of that could be attributed to travel numbers. First-quarter mainland flights to Macau were below 77% of 2019 levels while visitation from surrounding countries remains below pre-pandemic levels, according to Barclays.
That's been reflected in revenue numbers, too. Despite Las Vegas Sands' growth from 2022, the first quarter Macau revenue of $1.28 billion is still a far cry from the $2.33 billion in the first quarter of 2019.
"[Macau] is in its infancy as far as a return to a more normal operating environment," Las Vegas Sands CEO Rob Goldstein told investors during the company's earnings call on April 19. "It's not even — I think we're — it's still early days there. This first quarter is still not a representation of what can happen in Macau or will happen. So, I wouldn't call it normal operating mode. And as you referenced, the acceleration in revenues is clearly there and that will accelerate margins."
The growing anticipation for a strong return of Macau comes as Las Vegas traffic has boomed following pandemic lockdowns. Barclays believes the region may be "more resilient," than pre-pandemic, and Wynn is strategically benefitting more than other players in the region. Wynn is outpacing other Vegas operators in room rates, table spend, and slot play, per Barclays research.
"We increasingly believe WYNN will be able to hold onto recent property performance in Las Vegas in spite of macro conditions worsening, or at least hold in better than we think current investor expectations assume, based on a certain level of scarcity value for WYNN’s high-end product that should keep it relatively insulated,"
Josh is a reporter for Yahoo Finance.
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