What happened
Investors of Penn National Gaming (PENN 0.15%) 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.
So what
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).
Image source: Getty Images.
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.
Now what
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.
