On Tuesday, Morgan Stanley (NYSE:MS) downgraded shares of Melco Resorts & Entertainment Limited (NASDAQ:MLCO) from Overweight to Equalweight, adjusting the price target to $7.50 from the previous $9.60. The firm indicated a shift in stock preferences within the gaming and hospitality sector.
The downgrade comes as Morgan Stanley sees more potential in other companies within the industry. Specifically, the firm expressed a preference for Sands and Galaxy due to their stronger market share momentum, the potential resumption of dividends, and share buybacks from Las Vegas Sands (NYSE:LVS) Corp. This preference is supported by LVS's impressive 76.43% gross profit margin and strong financial health score of "GREAT" on InvestingPro.
In terms of mid-cap companies, Morgan Stanley highlighted MGM Resorts (NYSE:MGM) International and Wynn Resorts (NASDAQ:WYNN), Limited as more favorable options compared to Melco Resorts, citing higher dividend yields and more attractive valuations.
Melco Resorts, which operates entertainment and casino resort facilities in Asia, has been reassessed in the context of its industry peers. Morgan Stanley's revised price target of $7.50 reflects the new Equalweight rating and is a decrease from the former target of $9.60.
The firm's commentary on the downgrade emphasized the comparative analysis within the sector. "Stock preferences: We downgrade MLCO to EW from OW. We prefer Sands over Galaxy for more visible market share momentum, dividend resumption and LVS share buybacks. Among mid-caps, we prefer MGM and Wynn over MLCO for higher dividend yields and cheaper valuations," stated Morgan Stanley in reference to the rating change.
Investors and market watchers will likely monitor Melco Resorts' performance in the market following this adjustment by Morgan Stanley, as well as the company's response to the competitive challenges highlighted by the firm.
For deeper insights into the gaming sector's competitive landscape and detailed analysis of Las Vegas Sands' current position, including 8 additional ProTips and comprehensive valuation metrics, investors can access the full research report on InvestingPro.
In other recent news, Las Vegas Sands Corp. reported strong performance in its Macao and Singapore markets in the third quarter of 2024. The company's total gaming revenue in Macao increased by 13% year-over-year, with mass gaming revenue up by 14%.
The hold-adjusted EBITDA for Macao operations was reported at $583 million, surpassing the Street's expectation. However, the Singapore operations yielded a hold-adjusted EBITDA of $484 million, slightly below the Street's forecast.
Financial firms JPMorgan (NYSE:JPM), Mizuho (NYSE:MFG) Securities, and Stifel have updated their outlook on Las Vegas Sands Corp., raising their price targets. JPMorgan increased the price target from $60.00 to $62.00, maintaining an Overweight rating. Mizuho Securities raised the price target from $52.00 to $57.00, keeping an Outperform rating, and Stifel increased the price target from $55.00 to $64.00, maintaining a Buy rating.
These adjustments follow several recent developments, including the opening of the Londoner Grand Casino (EPA:CASP) and the ongoing $1.75 billion refurbishment at Marina Bay Sands in Singapore.
Despite renovation disruptions, Las Vegas Sands Corp. also announced a repurchase of $450 million in stock and an increase in its annual dividend to $1 per share for 2025. These recent developments highlight the company's robust growth and its optimistic outlook for future performance in its key markets.
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