Texas Capital Downgrades Melco Resorts to Hold on Macau GGR Weakness
Texas Capital analyst David Bain downgraded Melco Resorts & Entertainment to hold from buy. Shares are off 2.31% on volume that’s more than double the daily average, extending a slide in which the Macau casino stock shed 48.5% of its value over the past year. He trimmed his price target to $5.50 from $8, though the new target implies potential upside of more than 30%.
SCCG Take — Elevated promotions and China macro pressures limit near-term rebound for Macau operators. GGR stabilization and consensus adjustment will determine whether the current valuation disconnect narrows.
Texas Capital analyst David Bain downgraded Melco Resorts & Entertainment to hold from buy. The move sent shares of Lawrence Ho’s company down 2.31% in midday trading on elevated volume. The stock has shed 48.5% of its value over the past year.
Bain cited variance between his third- and fourth-quarter EBITDA forecasts and consensus estimates. Slack Macau gross gaming revenue and China’s 20% tax on offshore trust assets also factored into the call. He cut the price target to $5.50 from $8, a level that still implies more than 30% upside from current trading.
Macau Headwinds Drive the Downgrade
Macau fundamentals remain under pressure. When extrapolated on a daily basis, September GGR was the worst month for concessionaires since January 2025. Mid-October channel checks show no material positive turn.
Visitation from mainland China continues to trend higher, yet many arrivals do not gamble. Bain points to prolonged deflationary pressures, sticky property market weakness and lower employment in China. The July 2026 20% tax on offshore trust assets, applied retroactively to the early 2020s, has triggered restructuring and capital liquidation.
Path to a More Constructive Stance
Melco’s core premium-mass and VIP customers face fierce competition for play in a diminished junket environment. That dynamic has driven elevated promotional activity. One of six concessionaires recently increased promotional levels, leaving Bain less optimistic that spend will ease over the next several quarters.
“Despite our rating change, we note MLCO’s free cash flow yield is above 20%, and it trades below its historical enterprise value/EBITDA,” observes Bain. “We could potentially become more constructive following a rationalization, in our view, of consensus estimates, and Macau GGR stabilization, particularly given our positive view of MLCO’s management and product offering.”
According to Casino.org, these conditions set a clear hurdle for any reversal. GGR stabilization and consensus recalibration remain the measurable markers.
Reporting: Casino.org News
Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.
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