Nearly three months after the lights dimmed on the Las Vegas strip, due to the sars coronavirus pandemic of judgment, of many the entertainment district casino resorts has finally reopened their doors on 4 June, but in better standards of hygiene and social distancing protocols. Not surprisingly, some of the largest publicly-traded casino stocks have rallied in anticipation.
If the travel, the research is anything to go by, revellers can be back on their way to the City of Sin, and sooner rather than later. Online travel site Kayak registered an increase of over 100% in Las Vegas flight searches to the end of May, after the governor of Nevada, has announced that the casinos have been preparing to reopen, by USA Today. Casino bulls were also cheered the news that the Mississippi Gaming Commission has reported that the Memorial Day weekend across the state, revenues increased 17% on a year after the Gulf state opened its casino in advance of the holiday.
Below, we take a more detailed look at three major casino stocks before turning to their cards in order to identify potential 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 band of destinations, such as MGM Grand, Mandalay Bay, and the New York-New York is well positioned to take advantage of the reopening, as it generates approximately half of its revenues from its Las Vegas properties. To maintain sufficient liquidity as the economy recovers from the pandemic, the company has reduced its dividend yield of 0.05% and curbed non-essential spending. On June 5, 2020, MGM stock has a market capitalization of $10.71 billion and is trading almost 50% higher in the past month, in spite of the decrease 34.27% year-on-year.
MGM shares broke above a flag pattern on Wednesday and has continued moving higher on above-average volume in yesterday’s session, indicating the 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 the resistance of horizontal trend line. Manage the risk by placing a stop below the pennant and the move to the equilibrium point if the stock closes above the 200-day simple moving average (SMA).
Wynn Resorts, Limited (WYNN)
Wynn Resorts, Limited (WYNN) operates high-end casino resorts in Las Vegas and Macao under the Wynn and Encore brands. The $10.29 billion for the company, founded by Steven Wynn in 2002, registered an increase in its Macau game of volumes between mid-February and mid-March when the locking of the restriction eased in the Chinese entertainment mecca – a trend that will, 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 last month as of June 5, 2020.
The company’s share price has formed a large ascending triangle since the hollow below $40 in March. More recently, the price broke out above the top model of the trend with heavy volume this week, in a move that could ignite a rally up to a closely watched trendline at $140. Trade from current levels offers an attractive risk/reward ratio of about 1:8, assuming a stop-loss order placed under the breakout point at $90 per(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, the Parisian, in Macau, the Venetian and Palazzo among the most well-known properties. Credit Suisse analyst Ben Combes, updated Las Vegas Sands stock from “neutral” to “outperform” last month based on the casino operator’s strong liquidity position and its plans to continue to make substantial discretionary capital investments. In addition, Combes argues that new openings and renovations of resorts in Cotai to the broad of the Peninsula of Macau augurs well for the company. Trading at $52.35, Las Vegas Sands stock has added 15% in the last month, as of June 5, 2020.
Las Vegas Sands shares have also formed an ascending triangle over the last three months, helping to establish clear levels of negotiation. Yesterday, upside breakout from the structure may lead to a “short squeeze” in the following trading sessions, given that 55% of the company’s float is held short. Those who take a trade should look to book profits at either $62.50 or$ 70, the two crucial areas of overhead resistance.