Investors of Penn National Gaming (PENN 2.70%) got a dose of reality today, as Macao's results for April came in. Revenue was down 97% year over year for the casino city, and Penn National's stock is down with that news. As of 11:45 a.m. EDT, shares were down 13% and falling.
Today's news from Macao doesn't materially affect Penn National Gaming. The only thing it did was rattle investors' sentiment. This emotional response creates a volatile stock from day to day, and this volatility will likely continue until the coronavirus is fully behind us.
Due to the COVID-19 pandemic, visitor traffic to Macao has plummeted, along with gambling revenue. During April, Macao only generated 754 million pataca (around $95 million), according to government statistics. It's a tangible reminder of what happens to casino revenue when gamblers aren't there (just in case a reminder was needed).
It's noteworthy that April was Macao's worst month so far this year. Visitor traffic plummeted to just 156,000 tourists in February and 212,000 in March. But in mid-March, Macao implemented travel restrictions, sending tourism and gambling revenue down further.
For Penn National Gaming, investors have bid the stock up more than 300% from March lows. While all of Penn National's casinos are still closed, investors have been optimistic that life in the U.S. could soon return to normal.
In a letter to shareholders, Penn National's CEO said the company can survive the rest of the year even without revenue. Therefore, it has a future, assuming COVID-19 allows casinos to reopen by year's end. That's why long-term investors should try to block out the daily volatility, and focus on the business opportunity in a post-pandemic economy.