Macau Casino Stocks Have Favorable 2025 Setup, Says Analyst

Macau Casino Stocks Have Favorable 2025 Setup, Says Analyst

The previous year was largely lukewarm for Macau casino stocks, and with the December and 2024 gross gaming revenue (GGR) report published earlier today being similarly unexciting, some investors might lack enthusiasm for these stocks as 2025 begins. Nonetheless, at least one analyst thinks the group is positioned for growth this year. 

In a recent client update, Stifel analyst Steven Wiecyznski noted that investors have sufficiently considered worries about the macroeconomic situation in China, suggesting that Macau gaming stocks may see gains this year.

"We believe the setup is compelling for Macau-centric names heading into 2025. Stocks massively underperformed our coverage universe not only in 2024 but also since the pandemic kicked in. China macro fears remain the primary culprit as to why investors don’t want to revisit this group,” wrote the analyst. “However, based on current trading levels, we believe the market has priced in more than enough China macro pressures (as well as a Trump administration) at this point.”

Data published earlier Tuesday show that Macau operators recorded $28.3 billion in GGR last year, marking a 24% increase compared to the previous year. 

Wynn Might Be 2025 Victors Among Macau Casino Shares 

According to earnings and revenue percentages, Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are the top US-listed operators in Macau, and last year their stocks underperformed, with the former increasing slightly over 4% and the latter losing over 5%. 

Although Wynn's performance in 2024 was underwhelming, Wieczynski is optimistic that Wynn Macau's parent company can recover this year, possibly exceeding Sands' results. This is because Wynn Macau's clientele is less affected by fluctuations in China's economy compared to Sands China, which relies heavily on revenue from mass market patrons. 

“We believe WYNN’s relative premium mass exposure will help them be less sensitive to macro pressures whereas LVS is more dependent on bass mass visitation,” added the analyst. “We aren’t sitting here and trying to say a weaker China macro backdrop won’t impact Macau visitation/spend levels, but we would argue the market has already priced in a greater impact versus what will be observed.”

Wieczynski mentioned that for Wynn, which has non-Macau options available this year, along with other Macau casino stocks, it’s been some time since these equities appealed to investors; however, 2025 might be the year that makes that appeal justified, and “the risk/reward is too fascinating to ignore.” 

Increased GGR Growth May Boost Macau Casino Stocks 

Highlighting the 2024 letdown experienced by Macau gaming stocks is the fact that the sector usually aligns closely with GGR. Last year, gaming revenue in China rose dramatically, but stock prices did not reflect this trend. 

This year, it’s possible that the situation could change as Macau’s 2024 GGR total reached 80% of the pre-coronavirus figure, suggesting there is potential for further growth in 2025. 

“We believe investors need to focus on what the full-year 2025 could look like from a recovery/growth standpoint and believe consensus estimates could end up being conservative,” concluded Wieczynski. “Trying to model out the next six to twelve months does remain challenging given what is happening with government stimulus etc. We assume 1Q25 shows a 7%-9% y/y acceleration followed by an 8%-12% acceleration for 2Q25. At this point we believe full-year 2025 GGR should see growth in the range of 4%-10% over 2024.”