What happened

Shares of Studio City International (MSC) are racing 26.7% higher this week compared to where they closed last Friday, according to data from S&P Global Market Intelligence, after the casino resort operator reported better-than-expected fourth-quarter earnings results on Wednesday.

While revenue plummeted 85% year over year to just $4.2 million as a result of lockdowns imposed by the Chinese government to contain COVID-19 outbreaks, Studio City reported a narrower loss than last year, $0.443 per share versus $0.583 per share.

A person holding out casino chips.

Image source: Getty Images.

So what

Studio City is a Hong Kong-based casino operator that operates in the Cotai district of Macao, the only place in China where it is legal to gamble. It is majority owned by Melco Resorts & Entertainment

Ongoing COVID outbreaks led Beijing to enforce stringent lockdown and travel restrictions on people, virtually cutting off all tourism to Macao. However, the Chinese government finally lifted most of the restrictions late last year and gambling activity in Macao has picked up once more. 

The Gaming Inspection and Coordination Bureau of Macau reported gross gaming revenue (GGR) surged 233% in January from December, rising to 11.6 billion patacas, Macao's local currency (about $1.43 billion). It was up 83% from last year. It also just reported GGR rose another 33% year over year in February, though it was down somewhat to 10.3 billion patacas sequentially.

Now what

Although Studio City's net losses actually widened by 58% to $85.4 million from last year, the casino operator's outstanding share count more than doubled to 770.4 million shares in that same time frame. Had the share count not expanded so broadly, losses would have come in at $0.77 per share.

Still, the prospects for casino operators in Macao are brightening. Studio City notes that other than in certain situations, masks are no longer required. It does goes on to warn, though, that "the pace of recovery remains highly uncertain, and disruptions caused by the COVID-19 outbreak continue to have a material adverse impact on our operations, financial position and future prospects into the first quarter of 2023."

Studio City's stock has almost quadrupled in value off the lows hit last year, though it is down 16% from its highs.