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Texas Capital Downgrades Melco Resorts to Hold on Macau Revenue Concerns

BearishMedium impact
MLCO$4.32 2.86%

Texas Capital Securities downgraded Melco Resorts & Entertainment (NASDAQ:MLCO) from Buy to Hold and lowered its price target to $5.50 per share. The rating change comes as shares have dropped over 10% in the last six weeks, though the stock rose 2.86% today to $4.32.

Analyst David Bain pointed to significant gaps between the brokerage's EBITDA projections and broader market consensus expectations. The firm also highlighted reduced visibility for Macau gross gaming revenue as promotional spending in the region remains elevated over an extended period. Although the new $5.50 price target offers percentage upside, the firm emphasized that high volatility across the stock and gaming sector warrants caution.

Investors will be watching for signs of Macau gross gaming revenue stabilizing and potential downward revisions in consensus earnings estimates. Texas Capital indicated it could adopt a more constructive outlook if estimate adjustments occur and regional revenue trends settle, citing a positive view of the company's management and product line.

Key points

  • Texas Capital Securities downgraded Melco Resorts & Entertainment (NASDAQ:MLCO) to Hold from Buy and reduced its price target to $5.50 per share.
  • The downgrade follows significant discrepancies between firm EBITDA projections and consensus market expectations.
  • Analyst David Bain noted reduced visibility into Macau gross gaming revenue due to prolonged promotional activity in the market.
  • Melco Resorts stock has fallen more than 10% over the past six weeks, currently trading at $4.32 per share.

Written by our AI from expert market sources across the web. It can contain mistakes: check the facts before acting on them. Write-ups powered by the free AI API at FreeTheAI.org

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Questions and answers

Why was Melco Resorts downgraded by Texas Capital?

Texas Capital downgraded Melco Resorts to Hold due to large differences between its EBITDA estimates and market consensus, alongside lower visibility into Macau gaming revenues amid heavy promotional competition.

What is the new price target for Melco Resorts?

Texas Capital lowered its price target on Melco Resorts to $5.50 per share based on a reduced valuation multiple for Macau EBITDA.

How has Melco Resorts stock performed recently?

Melco Resorts shares have declined by more than 10% over the six weeks prior to the downgrade, though the stock gained 2.86% on the day of the announcement to reach $4.32.