These 3 Casino Stocks Have Explosive Potential

After news broke that Macau's gambling industry grew rapidly over the past quarter, shares of companies like Las Vegas Sands, MGM Resorts, Wynn Resorts, and Melco Crown shot up. Is now still the perfect time to jump in for amazing gains?

Apr 2, 2014 at 4:15PM

After news broke on April 1 that casino revenue in Macau rose for the third consecutive month, shares of several casino operators soared. Compared to the same month last year, monthly gross revenue for "games of fortune" jumped 13% from 31.3 billion patacas to 35.5 billion patacas ($3.9 billion to $4.4 billion). Coupled with the 40% increase reported in February and the 7% improvement in January, total revenue for the year, measured in Macau's local currency of patacas, has risen 20% to 102.2 billion patacas ($12.8 billion USD).

Given this great news, which casino operators should investors consider as a way to capitalize on the growing gambling trend?


*data in patacas
Source: Gaming Inspection and Coordination Bureau in Macau

The pure play in Macau
Probably one of the best prospects for investors to consider is Melco Crown Entertainment (NASDAQ:MPEL). With all of its operations located in Macau, the casino operator has about as much exposure to the market as investors could desire. This has paid off recently.

Melco Crown      
  2013 2012 2011
Revenue (billions) $5.09 $4.08 $3.83
Percent of Revenue 100% 100% 100%

Source: Melco Crown Entertainment

Over the past three years, Melco has seen its revenue grow an impressive 33% from $3.8 billion to approximately $5.1 billion. Despite seeing mediocre performance in its Altira Macau location, the top line at the company's City of Dreams resort leapt nearly 34% for the year.

However, investors shouldn't expect Melco to be a pure play on Macau forever. Later this year, the company will be opening its much-anticipated City of Dreams Manila resort. Located in the capital city of the Philippines, management expects its first international casino to set the stage for further growth and value creation for shareholders.

Wynn isn't winning
Aside from Melco, another big play on Macau is Wynn Resorts (NASDAQ:WYNN). As of its 2013 annual report, management attributed about 72% of the company's revenue, which equates to approximately $4 billion, to its Macau operations. This is almost three times larger than the $1.6 billion the business chalked up to its domestic operations in Las Vegas.

Wynn Resorts      
  2013 2012 2011
Revenue (billions) $4.04 $3.67 $3.79
Percent of Revenue 71.9% 71.3% 71.9%

Source: Wynn Resorts

While Wynn has greater diversification than Melco, there is some downside associated with it. On top of the slow revenue growth reported by the company's Las Vegas properties, the business has been unable to experience much growth in Macau. As a percentage of sales, the company's Macau operations have not grown since at least 2011. This means that management is either being lackadaisical about growing or is unable to compete with other casino operations like Melco.

Las Vegas comes to Macau
Another strong play on Macau's growing casino business has been Las Vegas Sands (NYSE:LVS). With $13.8 billion in revenue for its 2013 fiscal year, Las Vegas Sands is the largest of the casino operators profiled here. What's more staggering is that 65.3% of its revenue, at nearly $9 billion, came from its operations in Macau, up from 52.4% of revenue in 2011.

Las Vegas Sands      
  2013 2012 2011
Revenue (billions) $8.99 $6.58 $4.93
Percent of Revenue 65.3% 59.1% 52.4%

Source: Las Vegas Sands

Over the past three years, Las Vegas Sands has been successful at focusing more of its efforts on developing in Macau. The company is so intent on grabbing a large market share in the region that it's currently working on opening one of its two new casinos there while completing the remaining phase of its development of Sands Cotai Central. If successful, this would increase the company's locations in the region from four to five.

Can MGM step up its game?
Finally, we arrive at MGM Resorts International (NYSE:MGM). In terms of total revenue, which amounted to $9.8 billion in 2013, the company is the second-largest casino player profiled here. But it has the smallest amount of exposure to Macau. At the end of its 2013 fiscal year, the company only derived about 33.8% of its revenue from the region.

MGM Resorts      
  2013 2012 2011
Revenue (billions) $3.32 $2.81 $1.53
Percent of Revenue 33.8% 30.7% 19.5%

Source: MGM Resorts

Admittedly, this is up from the 19.5% reported in 2011 (though that metric is a bit off since its exposure began in June of that year) and 30.7% in 2012. But it still remains a fraction the size of its rival's exposure. However, management has demonstrated an intent to increase its market share in Macau, as shown by the $2.9 billion MGM Cotai project the company is developing.

Foolish takeaway
Given the good news of continued growth in Macau's casino market, investors are right to expect positive results coming from businesses that have some exposure to the region. Moving forward, it's uncertain if this trend can continue. But for the Foolish investor who believes that it can, an investment in any of these companies might make sense.

For those who are particularly bullish, it would be a wise idea to consider a stake in Melco or Las Vegas Sands because of their performance lately. MGM might also be a win for investors who are confident in the company's ability to grow its market share in the region. Meanwhile, Wynn's inability to grow its operations in the area significantly may be a sign that its prospects are the most limited.

Boost your 2014 returns with The Motley Fool's top stock
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Daniel Jones has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers