COVID-19 Surge Undermines Casino Stock Recovery

The thrust of the COVID-19 cases in the south-west of the strength of Las Vegas to rethink the responsibilities of the client just two weeks after the reopening to the public. According to sources, the “vast majority of the patrons are not wearing masks, risking a second wave of forces casinos to stop once more. Players to game tables will now be required to wear masks, although the casinos do not have the mandate of face coverings for the slot machines, which have barriers between the seats.

The State of Nevada, just more of a positive day number of cases since the beginning of the crisis, the follow-up of the disturbing trends in Arizona and California. The upticks have occurred in spite of the relatively empty game rooms, raising fears of the potential impact on the local population if the crowds back in force. Worse still, the infected, customers will be jumping on the plans and sizes for all the destinations across the united States, acting as a potential “super-spreader” of the carriers.

During this time, the game has become dangerous to your health in Arizona, where a security guard at the reservation, belonging to the Gila River Hotels and Casinos, died of COVID-19, forcing the nation to “temporarily” close its doors. The operator had re-opened the game rooms May 15, and has been growing in power of the accommodation operations at the time of the incident, which forced a re-evaluation of “current safety standards.”

Recovery Will Be Slow

Although not a public company, Gila River crisis adds to bearish sentiment on the industry and the risk of venturing into a smoke-filled room with people who may not care about your health. Macau operators that include Wynn Resorts, Limited (WYNN) are running in the same scepticism, with the Gaming Inspection and Coordination Bureau reporting a 93.2% decline in May to a year of income, even if large casinos were open for the entire month.

Casino stocks have under-performed the S&P 500 index over the last four months, recovering little more than half of their losses and not go back to the main levels of support that have been beaten to the sale. In turn, this relative weakness adds to long-term bearish technical outlook, in which the actors of the market can not rule out a further decline and test of the March lows. In many ways, the fate of casino stocks in 2020 could be similar to the airline group, with an apparent “normality” to default to restore the majority of the loss of income.

Technical Outlook

Las Vegas Sands Corp. (LVS) manages the casino and lodging properties in both Las Vegas and Macao. The short-term price chart looks similar to rivals Wynn Resorts and Boyd Gaming Corporation (BYD), which manages 29 properties in Nevada as well as the Midwest, the South and the East. The stock topped out at a multi-year, nearly $40 in the second quarter of 2018, and entered in a modest decline that found support at $19 at the end of the year.

Side action continued until 2019, finally giving a January 2020 increase that was posted in 18 months in February. It was then sold to more than 80% to a seven-year low in the single digits, before a rebound made rapid progress in the end of March, almost tripling in value. The price action eased into a lazy slight increase in April, finally reversing to 200-day exponential moving average (EMA), resistance and the 50% sales dip in the first week of June. The decline sets to the 50-day EMA, the stock of which has criss-crossed several times since the 27th of April.

The balance volume (OBV), the accumulation-distribution indicator dropped to a three-year low in March and turned over in a accumulation of wavelengths, supported by bottom fishing and short covering. Advance almost reached the 2018 high before retiring in the last two weeks. This bullish divergence should support rising prices in response to relatively minor catalysts. It does not rocket science to understand that upticks in the casino floor traffic could light the fire.

The Bottom Line

Growth barriers raise doubts about the long-term result of Las Vegas and Macau, the recovery efforts in the wake of their pandemic production stops.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.


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