What happened 

Shares of MGM Resorts (NYSE:MGM) jumped 42.6% in April, according to data provided by S&P Global Market Intelligence, after investors became a bit more bullish on the casino industry's recovery. However, the stock has fallen 15.2% in the first three trading days of May following news out of Macao that has been even worse than expected. 

So what 

In March, the market's recovery and investors' more optimistic view of the effects of COVID-19 on the economy pushed stocks higher overall. Additionally, investors were pleased with the ability of companies to raise money to survive. MGM Resorts announced the offering of $750 million of senior notes, which it has now closed, to shore up the balance sheet. Others in the industry made similar moves. But last month's jump in the stock price happened without a lot of news-driven substance or financial results. 

The Macao skyline from the water.

Image source: Getty Images.

MGM's stock turned south over the past few days following the release of Q1 earnings and April gambling numbers from Macao. On the earnings side, revenue plummeted 21% on the Las Vegas Strip and 63% in Macao in the first quarter, and adjusted EBITDAR was just $295.1 million. 

What shocked investors was a 96.8% plunge in gambling revenue in Macau during April, which -- combined with the shutdown of casinos in the U.S. -- will result in a terrible Q2. Understandably, some of April's optimism is already wearing off. 

Now what 

We don't know when Macao or the U.S. gambling markets will recover, so investors are left to analyze how long a company can survive and how much upside there will be when casinos are humming again. On the liquidity front, MGM Resorts ended the quarter with $6 billion in cash on the balance sheet and a burn rate of $270 million per month during closures. 

We may know that MGM can last well over a year without revenue, but it's unclear when gamblers will want to return. Macao is suffering from travel restrictions from China, and the U.S. may not see travelers return in the same numbers for years. Don't be surprised if this stock remains volatile in 2020.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.