Thousands of investors around the world are worried that casino stocks will continue to decline in 2019 following their disappointing performance in 2018. Despite most investors having a positive outlook at the start of the year, casino stocks haven’t lived up to everyone’s expectations and instead went on a slippery downward spiral throughout 2018. The decline hasn’t given investors much hope for the future of the gaming industry, leaving many second-guessing their decisions to invest.
Leading gaming industry stocks including Wynn Resorts, MGM Resorts and Las Vegas Sands have all dropped by double-digit percentages since May. The puzzling part is that the decline doesn’t have any obvious reasoning behind it. The economy is flourishing, and the gambling industry is as popular as ever.
So, what’s happened?
Most have attributed the poor performance to the rising popularity in online gaming, which has taken many players away from the allure of land-based casinos in favour of online casinos. Another possible reason could be the fact that Macau’s gaming revenue failed to increase as much as expected, which could have caused an adverse effect on both Wynn Resorts and Las Vegas Sands’ revenues.
If casino stocks are to improve, Macau’s revenue trends will need to improve quite drastically, which may or may not happen in 2019.
Why have casino stocks underperformed in 2018?
2018 started quite well with casino stocks on the rise for some time. However, things took a turn for the worse in the summer when suddenly, casino stocks performed rather disappointingly.
The quality of online casinos may be causing a drop in the popularity of land-based venues. Major Las Vegas casinos aren’t attracting as many visitors as they once did and their decline in popularity has led many to believe that gamers are choosing an alternative means of gambling.
Online casino sites provide players with more benefits than most land-based casinos, including fantastic welcome bonuses, promotions and a massive range of games from slots to table games. They offer an alternative and far more convenient outlet for gamers to enjoy their favourite casino games from the comfort of their own home. However, the rising popularity in online gaming has many investors concerned about the future of casino stocks.
Is Macau to blame?
Macau’s gaming industry was on fire earlier this year, but gaming revenue has stagnated in China over the summer, and thus, casino stocks have suffered across the board. Macau is the world’s largest casino gambling hub, but it reported a mere 12.5% gross gaming revenue in June, which fell short of the estimated 18% many investors expected to see. Since then, Macau’s revenue has been on the decline, and it’s affected Wynn Resorts’ stock as a result. If Macau continues to fall short of expectations, the future of the gaming industry looks bleak at best.
But how is the casino stock market performing in other areas besides Macau?
As it turns out, not very well. Shares of Las Vegas Sands and MGM Resorts International dropped 6.67% and 3% respectively. The reason is because they, like Wynn Resorts, receive over 50% of their total revenue from Macau, which has been nicknamed the “Las Vegas of Asia”. And, if Macau isn’t performing well, it’s safe to assume that shareholders are also going to take a hit.
People are wondering why there’s been a steady decline in general interest in gambling over recent months in China and one viable reason is the fact that there has been construction work going on in Macau. Although nearly complete, the impact of the construction has proved detrimental to the casino stock market. Tourists are reluctant to visit and are opting for other locations such as Las Vegas to enjoy some gambling because there are many new resorts on offer and no construction projects to get in their way.
Will casino stocks improve in 2019?
Although the future is looking a little bleak at the moment, things could still turn around for the casino stock market. However, the cost of business is going up and this may impact the future casino stocks as it costs more to run casinos. Unless Macau quickens the pace with their construction plans and proves themselves as worthy competitors from nearby locations such as Singapore and South Korea, it might take longer for things to improve.
If you plan on investing in casino stocks any time soon, we suggest going for something that’s a little less risky. Things could still improve for the casino stock market as we head into 2019 as this isn’t the first time the industry has taken a knock. Although casino stocks have struggled to gain a positive momentum this year, if history is to repeat itself as it often does, casino stocks could recover in 2019.
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