Leading casino operators continue to struggle against the odds in 2020 as visitors stay away from Las Vegas and Macau – two of the world's biggest entertainment meccas – due to the coronavirus pandemic. Despite an initial uptick when resorts reopened after several months of government-imposed shutdowns, demand remains subdued in both locations. According to casino.org, Las Vegas gross gaming revenue (GGR) was down 39% year over year (YoY) in August, while Macau GGR suffered a massive 94.5% drop.
- Casino revenues fell sharply on an annualized basis in Las Vegas and Macau during August as visitors stayed away due to the pandemic.
- Las Vegas Sands Corp. (LVS) shares have found a zone of support between $43 and $45.
- Wynn Resorts, Limited (WYNN) shares have successfully held crucial support at around $69 since late June, with price rallying nearly 4% from this level on Tuesday.
In better news for casinos, however, research conducted by Morgan Stanley revealed that 5 out of the 23 Macau hotels it tracks were fully booked for the first days of October to celebrate China's Golden Week holiday amid easing pandemic restrictions across the country, per the South China Morning Post. Although this compares to 19 hotels booked at maximum capacity in the same week last year, the results were better than expected.
From a technical standpoint, industry heavyweights Las Vegas Sands and Wynn Resorts sit near key chart support ahead of their third quarter (Q3) earnings reports. Below, we take a closer look at each company and identify several high-probability trading opportunities.
Las Vegas Sands Corp. (LVS)
Las Vegas Sands owns and operates resorts featuring casinos, hotels, entertainment, restaurants, retail, and convention centers. Analysts expect the company, which discloses quarterly results today, to report a Q3 loss of 44 cents per share, down sharply from a profit of 75 cents in the year-ago quarter. Meanwhile, revenues are expected to come in at $867.4 million, indicating a YoY decline of 73.3%. Las Vegas Sands stock has a market capitalization of $35.3 billion and has tumbled 32% on the year as of Oct. 21, 2020.
The casino giant's share price has fluctuated in a steady trading range since early May, finding a stable zone of support between $43 and $45. Those who buy in this area should consider targeting a move to $53.50, where the stock may run into resistance from a horizontal trendline extending back over the past 18 months. A stop-loss order placed below the trading range at $43 offers a decent risk/reward ratio of over 1:2, assuming a fill at Tuesday's $46.20 close. ($3.21 risk per share vs. $7.30 reward per share).
The risk/reward ratio marks the prospective reward an investor can earn for every dollar he or she risks on an investment. Many investors use risk/reward ratios to compare the expected returns of an investment with the amount of risk they must undertake to earn these returns.
Wynn Resorts, Limited (WYNN)
Founded by renowned Vegas identity Steve Wynn in 2002, Wynn Resorts operates luxury casinos and resorts, including Wynn Macau and Encore in Macau and Wynn Las Vegas and Encore in Las Vegas. Wall Street expects the company to post a Q3 loss of $2.94 per share, which compares to a profit of 17 cents per share in the same quarter last year. Meanwhile, analysts forecast revenues of $479.95 million during the period, representing a top-line decline of 71%. As of Oct. 21, 2020, the stock has plummeted nearly 50% YTD and around 10% since late July.
Wynn shares have successfully held crucial support at around $69 since late June, with price rallying nearly 4% from this level on Tuesday. Swing traders who take a long position should think about scaling out at either $92 or $102.50 – both key areas of overhead resistance. Manage risk by placing a stop underneath the June 29 low at $67.54 and amending the order to breakeven if the stock climbs above the blue multi-month downtrend line.
Scaling out is the process of selling off portions of total held shares while the price increases. To scale out means to get out of a position (e.g., to sell) in increments as the price climbs.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.