Assumption that the coronavirus outbreak could make its way to Macau and stop gamblers from visiting the peninsula is impacting operators’ stocks this week. One of several names being affected by the health scare, is Las Vegas Sands (NYSE:LVS) which has dropped 5.33 percent over the last few days.
The first case of coronavirus in Macau was reported on Tuesday. A 52-year old woman on business travel from Wuhan, a city in central China which has been devastated by the respiratory illness, is currently being treated in a hospital in the Special Administrative Region (SAR). However, doctors believe she’s not an active transmitter of the disease.
As reported by casino.org, LVS, who owns five properties in the world’s biggest gaming center, has been punished by the health alarm and one analyst’s notion that the company may be unable to deliver on strong mass market estimates this year.
In a note to clients earlier this week, Morgan Stanley Thomas Allen said, “There’s risk mass growth could come in even lower as net rooms growth will be essentially flat and hotel occupancies have surpassed Vegas, with the Macau tourism office suggesting last week that visitation could decline in 2020.”
Allen dropped his rating on LVS to “equal weight” from “overweight” with a $72 price target. That’s a little above the stock’s Wednesday close at $69.45.
Difference Of Opinion
There are other Macao operators besides Sands that are feeling the adverse effects of the coronavirus scare. This week rivals Meclo Resorts (NASDAQ:MLCO) and Wynn Resorts (NASDAQ:WYNN) have seen their shares fall more than six percent.
While comparisons are being drawn to the 2003 SARS outbreak in Hong Kong that killed nearly 300 people, Chinese health officials believe the coronavirus hasn’t reach those levels yet. Some analysts are saying if the respiratory illness can be quickly contained, recent weakness in Macau equities presents investors with a buying opportunity.
In a note out earlier today, Bank of America analyst Shaun Kelley said, “Additionally, our Hong Kong team’s channel checks point to limited disruption, and while we remain cautious, we do not see large amounts of incremental risk at this point.”
Kelley has price forecasts on LVS, Melco and Wynn of $72, $34.10 and $160, respectively.
In an attempt to stop the coronavirus from spreading, Macau operators are deploying temperature-checking machines at all venue entry points and employees are putting on surgical masks.
Coming off less revenue and visits last month, it is advisable for gaming companies to relieve visitors’ worries about the virus, especially with the two-week Chinese Lunar New Year celebrations scheduled to start on Jan. 25.
Kelley, the Bank of America analyst, said channel checks indicate room reservations on the peninsula in advance of the New Year celebration have been strong, while data shows only sporadic cancellations following the coronavirus news.