What happened 

Shares of casino stocks marched higher in trading Monday after it was announced that some restrictions on travel to Macao are being lifted. Wynn Resorts (WYNN 1.70%) saw shares climb as much as 10.3%, and Melco Resorts (MLCO 5.01%) rose 11.9% before the stocks closed the day up 10% and 11.1%, respectively. 

The biggest winner was MGM Resorts (MGM 0.35%), which will not only benefit from the increase in Macao visitors, it got a big new investor as well. Shares of MGM were up as much as 25% before closing up 13.8% for the day. 

Macao's skyline on a sunny day.

Image source: Getty Images.

So what 

Macao's government announced individual visit scheme (IVS) visas will resume for residents from Zhuhai in China starting on Wednesday. According to new rules, visitors much present a negative COVID-19 test from the past seven days and have a green health code to get the visa. This is seen as a potential precursor to opening travel from the all-important Guangdong province, which accounted for nearly three-quarters of Macao's visitors. 

Restrictions traveling to and from Macao have hammered the region's gambling revenue, which is down at least 93% in each month from April through July. Even a small recovery in gambling revenue would be welcome news for Macao's casino stocks.

As for MGM Resorts, it will benefit from more business in Macao, but the bigger news was IAC/InterActiveCorp announcing a 12% stake in the gambling company. The company's chairman, Barry Diller, said he thinks that online gambling is going to be a huge opportunity and MGM has the potential to be a big player. Investors may be surprised to learn that MGM is already one of the biggest online gambling companies in the U.S., with the BetMGM app and its casinos and sportsbooks. The online gambling business is still a fragmented business right now, but MGM has the opportunity to leverage its brand to grow in the segment, and that's one reason Diller sees so much upside. 

Now what 

While the Macao news is most important long-term for gambling stocks, investors shouldn't expect a rapid recovery. Gambling numbers have been extremely weak in Macao, despite past travel restrictions being eased. It may still take a few months for the business to return in any significant way, and I wouldn't be surprised if it was well into 2021 before anything near normal revenue is seen. 

I'm much more bullish on MGM Resorts, and it's not just because a big investor has acquired the stock. I do think online gambling will make this a great growth stock in the gambling business; it's one of the main reasons I said the stock was a buy last month

It's been a rough year for casino stocks, but there may finally be a light at the end of the tunnel. Las Vegas casinos are open and performing surprisingly well even though COVID-19 is still a problem in the U.S. If companies can add a boost in Macao revenue, we may see operations recover later this year. The business won't be what it was just a few months ago, but some revenue is better than none for the casino industry.