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Macau casino stocks faced a largely tepid performance in 2024, and the release of the December and full-year gross gaming revenue (GGR) report earlier today has done little to excite investors as 2025 begins. However, Stifel analyst Steven Wieczynski believes there is significant potential for upside in the group this year despite current skepticism.
In a new report to clients, Wieczynski stated that market participants have already priced in concerns about the macroeconomic climate in China, suggesting that Macau gaming equities may be poised for a rebound in 2025. “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,” he wrote. “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.”
According to data released earlier today, Macau operators posted $28.3 billion in GGR in 2024, reflecting a 24% year-over-year increase.
Wynn Could Be a Top Performer Among Macau Casino Stocks
Among US-listed Macau operators, Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) hold the largest percentages of earnings and revenue. Both stocks were lackluster in 2024, with Las Vegas Sands gaining just over 4% and Wynn Resorts dropping more than 5%.
Despite Wynn Resorts’ underperformance last year, Wieczynski sees strong potential for the company to rebound in 2025. He suggested that Wynn Macau could outperform its rival Sands China due to differences in their client bases. Wynn Macau’s premium mass-market clientele is less influenced by fluctuations in China’s economy, unlike Sands China, which heavily relies on mass-market customers for revenue.
“We believe WYNN’s relative premium mass exposure will help them be less sensitive to macro pressures whereas LVS is more dependent on base mass visitation,” Wieczynski explained. “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.”
He also noted that Wynn Resorts has additional non-Macau operations that could bolster its performance this year. Wieczynski remarked that it has been some time since Macau casino stocks were seen as enticing to investors, but 2025 might mark a turning point. “The risk/reward is too intriguing to pass up,” he added.
Potential GGR Growth Could Drive Stock Performance
The underperformance of Macau casino stocks in 2024 stands out because these equities typically align with trends in GGR. While gaming revenue in Macau surged last year, the stocks failed to follow suit.
Wieczynski suggested this trend could reverse in 2025. He highlighted that Macau’s 2024 GGR represented 80% of pre-pandemic levels, leaving room for further growth this year.
“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,” Wieczynski concluded. “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.”
By fLEXI tEAM
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