A Busy Weekend In Vegas After A Weak Month In The Market

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Includes: BYD, LVS, MGM, MPEL, WYNN
by: Aaron Murdock

Since I last wrote about the major casino stocks on May 24, their shares have started to find a bottom. MGM Resorts (NYSE:MGM) is up about 3%, Las Vegas Sands (NYSE:LVS) is down 5%, Wynn Resorts (NASDAQ:WYNN) is down 2%, Melco Crown Entertainment (NASDAQ:MPEL) is down 2%, and Boyd Gaming (NYSE:BYD) is unchanged. Over this time period the S&P 500 has been unchanged.

Gaming revenue in Macau for the month of May was reported on June 7 as $3.3 billion, up only 7.3% year over year. It was, however, the second highest month ever for gaming revenues in Macau. Nevertheless, it was disappointing after a 22% increase in April. This recent article gives you a reason to be positive on Macau in the back half of the year as China attempts to stimulate its economy. JPMorgan also recently said it expects gaming revenue in Macau in to increase 22% this year. It is important to note that an increase of just 18% would be equal to total gaming revenue on the Las Vegas Strip in 2011.

It was an eventful weekend in Las Vegas sports books. I'll Have Another pulling out of the Belmont Stakes likely reduced bets placed on the final leg of Triple Crown. But there was plenty to bet on this weekend in Vegas, including a major fight at the MGM Grand, the NBA Eastern Conference Finals Game 7, and the Stanley Cup. Electric Daisy Carnival also brought a lot of people to Las Vegas this past weekend and even with bad weather on Saturday, the event, which is in its second year, was a success. Probably the biggest negative on the weekend was at MGM properties, where computer outages Friday forced properties to check customers in manually, creating delays of many hours at some properties. I think this could lead to a slight impact on the quarter; however, I don't think it will be a make or break event for this quarter.

The other Las Vegas news out today was April gaming revenues and visitor statistics. April gaming revenue was up 6.16% year over year in Nevada, after declining 10.8% in March. However, visitors to Las Vegas fell in April by 0.9%, the first decline in 26 months. Convention attendance was also down 4.9% in April and convention visitors year to date still remain slightly below 2011 levels -- 2.03 vs. 2.04 in 2011. However, the number of meetings and conventions held are up 27.5%. I believe convention visitation has been very strong this year, as last year had over 100,000 extra visitors from CONEXPO in March and 20,000 visitors from the International Sign Association convention in April. Both of those events were not held in Las Vegas this year.

Given this mixed data in both Las Vegas and Macau, it will be interesting to see how the gaming companies fared in the current quarter. Given that all of these gaming companies have seen such large declines from highs earlier in the year, and they appear to be bottoming here, I think now would be a good time to start testing the waters in these names.

Data sourced from YahooFinance, Finviz.com, and company filings.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MGM, LVS over the next 72 hours.