As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.
Today, I'll look at Melco Crown (MPEL 0.46%). The international gaming company was a big winner in 2012, but concerns about overcapacity in Macau amid slowing economic growth in China has made some investors wonder how long the good times can last. Below, you'll learn more about Melco Crown's prospects for 2013.
Stats on Melco Crown
|
Average Stock Target Price |
$17.16 |
|
Full-Year 2012 EPS Estimate |
$0.71 |
|
Full-Year 2013 EPS Estimate |
$0.79 |
|
Full-Year 2012 Sales Growth Estimate |
2.3% |
|
Full-Year 2013 Sales Growth Estimate |
7.1% |
|
Forward P/E |
21.1 |
Source: Yahoo Finance.
Can Melco Crown keep winning in 2013?
After a huge gain in 2012, analysts aren't so sure that Melco Crown has much more upside. Despite expectations for a better than 10% gain in earnings per share, the current target stock price is less than 3% higher than where it finished 2012. Still, with a relatively high forward valuation, it's arguably reasonable for the shares to take a break to let earnings catch up at least a bit.
What may be surprising for some investors is that Melco Crown's gains came largely from internal efficiencies rather than external growth. With a long reputation for having weaker margins than Macau competitors Wynn Resorts (WYNN 3.15%) and Las Vegas Sands (LVS 2.11%), huge margin gains over the past four years have boosted Melco Crown's bottom line.
In the coming year, investors will really focus on Melco Crown's growth opportunities. On one hand, the company is sitting on a big stake in the Studio City development on the south end of Cotai, and although regulators aren't allowing a new resort there given table-game limitations, Melco thinks it will get approval in the near future. Even more promising is the potential to expand beyond Macau with Melco's $1 billion resort and casino in the Philippine capital of Manila.
Still, changing trends in Macau also represent a risk for Melco. Last month, a crackdown on junket operators raised concerns that casinos in the region could be affected. Yet the stocks involved didn't suffer for long, with Melco and MGM Resorts (MGM 4.77%) both seeing significant gains during the month of December.
Looking forward, Melco has the luxury of only having to worry about Asia rather than trying to straddle the globe as its main competitors do. That should allow Melco to focus more on its key markets and put together better growth potential going forward.
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