Shares of the U.S.-traded gambling companies with exposure to Macao jumped on Monday as China eased some of its travel restrictions. Shares of Wynn Resorts (NASDAQ:WYNN) jumped as much as 12.2%, Las Vegas Sands (NYSE:LVS) was up 9.6%, and Melco Resorts (NASDAQ:MPEL) rose as much as 17.9%. Shares of the three stocks were up 12.1%, 7.6%, and 17.4% respectively at 12:45 p.m. EDT.
The biggest news is that Guangdong Province in China, which neighbors Macao, is easing a quarantine requirement for visitors coming from Macao. Previously, people coming from Macao into Guangdong had to quarantine for 14 days, which effectively cut off travel from a key region for the industry. But that quarantine requirement will be lifted on Wednesday, potentially leading to a partial recovery in Macao.
Another significant change is that starting tomorrow, people leaving Macao by ferry or air will need to present a negative COVID-19 test from within the last seven days. This is also aimed at reducing the spread of the virus and opening up more travel to regions like Hong Kong, which is a key travel hub to Macao.
Macao's gambling market may take a while to return to any level of normal, but even a small increase in visitors would be welcome news for resorts. Macao's gambling revenue has fallen over 90% year over year in the last three months and is down 77.4% overall this year.
The hope, for now, is that Macao stops being a cash drain for these companies and at least starts breaking even operationally. Over the next few quarters, it may even start generating cash, which would be a huge turn of fortunes.
Investors are looking for any sign that the gambling industry will return in the near future, and for Macao, there seems to be a light at the end of the tunnel. At the same time, U.S. gambling operations seem to be in danger again now that COVID-19 cases are rising across the country.
Given the challenges resorts and casinos will face in attracting travelers and businesses over the next year or two, I wouldn't get too excited about the gambling industry giving us growth stocks just yet. There appears to be a light at the end of the tunnel and Macao is currently leading the way -- that's why stocks are up big today. However, don't be surprised if gambling stocks continue to be volatile throughout the year.