Casino-related stocks managed to rebound this week as the government has approved the reopening of major gaming centers and states. The sector was one of the hardest hit during the spread of the coronavirus pandemic in the US back in March, with most casinos and hotels being forced to close down to mitigate the spread of the disease.
Las Vegas had announced that it will be allowing casinos to reopen on June 4, albeit with some restrictions. The reopening has managed to revitalize investor confidence in the sector, resulting in the rally of major casino stocks such as Caesars, Wynn Resorts, and MGM Resorts.
The three stocks alone had rallied by an average of 140 percent compared to their lows back in March. One of the biggest gainers this week was Penn National Gaming, whose stock prices surged by more than 780 percent from its lowest point during the height of the pandemic in the US.
Most of the casinos in Las Vegas will be required to implement strict social distancing rules and cleaning protocols. Many of the city's popular buffets have been ordered to remain closed. Visitors to the strip will also be required to wear masks or undergo temperature checks before being allowed to enter the premises.
Caesars CEO, Tony Rodio, mentioned in a statement that customer demand to visit Las Vegas has been stronger than initially anticipated. He added that most of the establishments have been scrambling to resume operations to meet the swarm of people that are expected to visit the city this week.
Analysts have pointed out that casino stocks could rally even further in the coming weeks as businesses start to ramp up their operations with the economy reopening. Investors are all now buying up mostly beaten-up stocks, most of which are part of the S&P 500's casino-related subgroup. The market itself is apparently betting big on a major rebound in both US-based and Macau-based casino businesses.
Companies such as Sands and LVS have become more favorable options for investors given their operations in the Asian gambling destination. During the first few months of the year, the pandemic had managed to reduce gaming revenues in Macau by more than 90 percent. With the restrictions now lifted and most of the city's gambling destinations now reopening, investors are expecting a new surge in profits in the coming quarters.
For this reason, investors are mostly favoring companies that have much larger exposure in China. Credit Suisse analyst, Ben Chaiken, pointed out that stocks such as Las Vegas Sands are becoming increasingly popular, given their high exposure and business in Macau. Companies such as MGM are much less popular as their performance will still be heavily reliant on the smooth reopening of Las Vegas and the quick recovery of their respective local businesses within the city.
