Gaming Stocks Sink as Macau's Growth Slows

Macau's growth slowed in May, but that isn't a reason to panic sell your gaming stocks today.

Jun 3, 2014 at 4:28PM

Gaming stocks are down big today after Macau released May gaming numbers. Overall gaming was up just 9.3% for the month, hitting $4.05 billion. That's an impressive growth rate, but it follows months of 40.3%, 13.1%, and 10.6% growth from February through April, so the numbers are trending lower, and fell below Wall Street's 14.5% estimate.  

The reaction was to kick Las Vegas Sands (NYSE:LVS), Melco Crown (NASDAQ:MPEL), Wynn Resorts (NASDAQ:WYNN), and MGM Resorts (NYSE:MGM) lower, making a bad year worse for the first two.

LVS Total Return Price Chart

LVS Total Return Price data by YCharts

But before you run out and sell gaming stocks, let's put this into perspective.

Macau's gaming market is still growing like crazy
While growth slowed a bit in May, gaming revenue is still up 15.8% in 2014 through May. That far exceeds markets like U.S. regional gaming or Las Vegas, which are struggling to grow by mid-single digits. Even high single digits is good growth, and with capacity limited in Macau until new resorts open up it's probably what investors should expect.

Mpel Tower

Macau's growth may not be all that impressive until new construction like City of Dreams' new tower are completed. Image courtesy of Melco Crown.

Last year's growth of 18.6% will be tough to match, but Macau is still a strong growth market -- so operationally I wouldn't be worried about these companies. The question mark is value for investors.

Bang for your buck
Melco Crown, Las Vegas Sands, and Wynn Resorts are all trading with an enterprise value/EBITDA of just over 13, which is high even for a region growing at double digits. That's why their stocks can move lower quickly when growth doesn't meet expectations.

MGM is a little cheaper at 10 time EBITDA, but keep in mind that it's most focused on Las Vegas, which is barely growing.

At this value and growth gaming stocks aren't a screaming buy, but I'd look at any pullback as a buying opportunity. Each of these companies have great growth prospects in Macau, and if you can get them at lower prices they're long-term buys. As I pointed out last month, I think MGM has the most upside, with Wynn providing the best value, but even buying a basket of all four would be a great way to get exposure to gaming.

Will this stock be your next multi-bagger?
Gaming stocks have been phenomenal for years and if you give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Travis Hoium manages an account that owns shares of Wynn Resorts, Limited. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

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.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

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. The show is also heard weekly on dozens of 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. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers