Casino stocks have been beaten down in the last few months, especially those with exposure to Asia’s massive gambling haven, Macau, as year-over-year gaming growth there slowed to less than 15% in May, June, and July after rising more than 20% in the first months of the year.
However, gaming revenues began to rise again in August, reaching 17%, and if that strength can continue the rest of this year, big casino stocks could be in for some big gains.
These two stocks in particular could see gains of over 40%, and both have some promising prospects on the horizon.
Wynn Resorts (NASDAQ: WYNN)
Wynn Resorts (NASDAQ: WYNN) has had a rough couple of months, but it could climb much higher if Macau gaming revenues continue to improve.
Wynn boasts three major resorts in Macau with its Encore, Wynn Macau, and Wynn Palace properties, and nearly 75% of the casino operator’s total revenues come from Macau. And there’s still room to grown in Macau as the company owns a 7-acre parcel of developable land adjacent to its best-performing Wynn Palace property with development plans already underway.
While Wynn is hugely dependent on Macau now, the company has its sights set on expanding in Las Vegas and opening up in markets like Boston and Japan. It’s already beginning to lay the carpet in its new Boston property, but Japan is still a bit of a gamble.
If Wynn were to win a gaming license in Japan, it could generate $10 billion or more in annual gaming revenue which would be a game-changer for the company.
The average 12-month price target for WYNN is $189.59, indicating possible upside of 48.28%.
MGM Resorts International (NYSE: MGM)
While Wynn has a bigger reliance on Macau for its revenue, MGM Resorts (NYSE: MGM) only operates two properties in Macau – MGM Cotai and MGM Macau.
The company does, however, have a big presence in Las Vegas and is the largest casino operator in the U.S. with $4 billion in revenue just from its Vegas properties.
But what’s most interesting about MGM is its move into the sports betting space after the U.S. Supreme Court struck down the federal ban on it. So far, MGM has made several big moves in the space including inking a multiyear agreement with the NBA to make the casino operator the first-ever sanctioned sportsbook in the basketball league’s history.
Its geographic diversification and bet on sports gambling make this casino operator an interesting play in the space. And while MGM might be down nearly 20% year-to-date, it looks like a good buying opportunity.
Analysts’ average 12-month price target for MGM is $36.79, or 40% higher than the price as of this writing.