In a research note to investors, analyst Joseph Greff pointed to increasing China-U.S. trade tensions, Hong Kong protests, slowing economic growth in mainland China, and potential issues related to the city's largest junket.
"We lower our aggregate Macau EBITDA projections by 1% in the the third quarter in 2019, 2% in the fourth quarter, and 3% in 2020, with
Melco and MGM having the largest negative estimate revisions," Greff wrote.
As a result, Greff said he was lowering his Macau property level estimates: Wynn Resorts' stock price target was cut to $136 from $137; Melco Resorts & Entertainment's (MLCO) - Get Report stock price target was cut to $25 from $29; MGM Resorts International's (MGM) - Get Report stock price target was cut to $36 from $37; and Las Vegas Sands' (LVS) - Get Report stock price target was cut to $60 from $68.
Greff said he still continues to see value in the Macau operators. He kept overweight ratings on Wynn, MGM, and Melco, and a neural rating on Las Vegas Sands.
"We continue to see value in the Macau operators with EV/EBITDA valuations and FCF yields/multiples attractive relative to history, and because of (1) valuation, (2) recent weak share price performance, and (3) what we'd like to think is a risk reducing exercise with our negative estimate revisions today, we think the shares are appropriate for risk tolerant investors," he wrote. "That said, we recognize that trade and China macro will drive sentiment and valuation and both factors are highly unpredictable."
Last month, Wynn Resorts reported better-than-expected earnings as casino revenue surged in Las Vegas. Casino revenue from Wynn Macau rose 1.7% to $481.2 million. Wynn Palace, also in Macau, saw its casino revenue rise by 0.7% to $528.5 million.
Shares of Wynn were down 1.2% to $110.05, Melco was slightly up at $21.06, MGM was up nearly 1% to $28.25, and Las Vegas Sands was up slightly to $56.31.
Stocks ended higher on Thursday after officials from Washington and Beijing said they would resume trade talks in October. On Wednesday, Hong Kong Chief Executive Carrie Lam formally withdrew a controversial extradition bill that has triggered moths of protests in the China-controlled territory.