Nearly three months after the lights went out on the Las Vegas strip due to the coronavirus pandemic shutdown, many of the entertainment district's casino resorts finally reopened their doors on June 4, albeit under enhanced hygiene standards and strict social distancing protocols. Not surprisingly, some of the largest publicly traded casino stocks have rallied in anticipation.
If travel searches are anything to go by, revelers may be back on their way to Sin City sooner rather than later. Online travel site Kayak saw a surge of more than 100% in Las Vegas flight searches in late May after the Nevada governor announced that casinos were preparing to reopen, per USA Today. Casino bulls have also cheered news that the Mississippi Gaming Commission reported that Memorial Day weekend statewide revenues increased 17% year over year after the Gulf state opened its casinos ahead of the holiday.
Below, we take a more detailed look at three leading casino stocks before turning to their charts to identify possible swing trading opportunities.
MGM Resorts International (MGM)
MGM Resorts International (MGM) owns and operates casinos, hotels, and entertainment resorts in the United States and Macau. The company behind popular strip destinations such as MGM Grand, Mandalay Bay, and New York-New York sits well positioned to benefit from the reopenings, given it generates about half of its revenue from its Las Vegas properties. To maintain sufficient liquidity as the economy recovers from the pandemic, the firm has slashed its dividend yield to just 0.05% and reined in non-essential spending. As of June 5, 2020, MGM stock has a market capitalization of $10.71 billion and is trading nearly 50% higher over the past month, despite being down 34.27% on the year.
MGM shares broke above a pennant pattern Wednesday and continued moving higher on above-average volume in yesterday's session, indicating buyer conviction behind the move. Those who roll the dice at current levels should consider setting a profit target near $34, where the price finds resistance from a horizontal trendline. Manage risk by placing a stop beneath the pennant and moving it to the breakeven point if the stock closes above the 200-day simple moving average (SMA).
Wynn Resorts, Limited (WYNN)
Wynn Resorts, Limited (WYNN) operates upscale casino resorts in Las Vegas and Macau under the Wynn and Encore brands. The $10.29 billion company, founded by Steven Wynn in 2002, reported an increase in its Macau gaming volumes between mid-February and mid-March when lockdown restrictions eased in the Chinese entertainment mecca – a trend that it hopes will follow suit at its Vegas properties. Like MGM, Wynn has suspended its quarterly dividend to maintain sufficient liquidity during the current economic uncertainty. The stock has gained 18.56% over the past month as of June 5, 2020.
The company's share price has formed a broad ascending triangle since bottoming below $40 in March. More recently, price broke out above the pattern's top trendline on heavy volume this week in a move that could ignite a rally up to a closely watched trendline at $140. A trade from current levels offers an enticing risk/reward ratio of about 1:8, assuming a stop order positioned beneath the breakout point at $90 (risk per share of $5.40 vs. reward per share of $44.62).
Las Vegas Sands Corp. (LVS)
Las Vegas Sands Corp. (LVS) operates casinos and resorts in the United States and Asia, with the Venetian Macau, Parisian in Macau, Venetian, and Palazzo among the company's better-known properties. Credit Suisse analyst Ben Combes upgraded Las Vegas Sands stock from "neutral" to "outperform" last month based on the casino operator's strong liquidity position and its plans to continue making substantial discretionary capital investments. Furthermore, Combes argues that new openings and renovations of resorts in Cotai off the Macau Peninsula bode well for the company. Trading at $52.35, Las Vegas Sands stock has added 15% in the past month as of June 5, 2020.
Las Vegas Sands shares have also formed an ascending triangle over the past three months, helping to establish clear trading levels. Yesterday's upside breakout from the pattern may drive a short squeeze in subsequent trading sessions, given that 55% of the company's float is held short. Those who take a trade should think about booking profits at either at $62.50 or $70, both crucial areas of overhead resistance.