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Why Melco Resorts & Entertainment Is Soaring Today

By Rich Duprey – Aug 24, 2021 at 4:02PM

Key Points

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The Asian casino operator could benefit from easing travel restrictions.

What happened

Shares of Melco Resorts & Entertainment (MLCO 2.86%) were soaring 11% higher in afternoon trading Tuesday after Macao's Public Security Police announced travel restrictions between the gambling mecca and Guangdong province were easing.

Visitors from the nearby province on mainland China must show proof of a negative COVID-19 test taken within the last seven days, a relaxation from the previous 48-hour window that had been imposed on Aug. 9. A 12-hour threshold was initiated on Aug. 4 after a Macao family became infected with the delta variant of the coronavirus.

Woman holding out casino chips.

Image source: Getty Images.

So what

Casinos operating in Macao, the only place in China where it is legal to gamble, have suffered during the pandemic due to severe travel restrictions imposed by Beijing. While the city had been shut down for two weeks at the very onset of the outbreak in February 2020, visitors were forced to avoid the city despite it nominally being reopened for business.

Although monthly gaming revenue is 63% above what it was a year ago, giving hope to many that a recovery is underway, casinos are still hurting as gaming revenue remains 67% below where it stood in 2019. Melco's own revenue has been rising over time.

Now what

Every bit of relaxing of restrictions will help Macao-based casinos to recover, but investors should still tread lightly. The 48-hour window for showing proof of a negative COVID-19 test still remains in effect for visitors traveling to Macao from anywhere else on the mainland, limiting visits to the travel and tourism destination. 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Melco Resorts & Entertainment Limited Stock Quote
Melco Resorts & Entertainment Limited
$9.00 (2.86%) $0.25

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