A good bet?

04/09/19
  • Gaming stocks strong in 2019, especially since start of April
  • WYNN up more than 50% since late December
  • Potential Macau gaming rebound cited by analysts

It’s always interesting to see which stocks are up when the market as a whole is down. Sometimes, it can tip you off to action in sectors or industries you may have been overlooking.

Yesterday gaming stocks (as in casinos and resorts, not video games) waved that flag. With all major US indexes in the red approaching the midpoint of yesterday’s trading session, the following 60-minute chart shows two big gaming stocks, Wynn Resorts (WYNN) and Las Vegas Sands (LVS), were flashing green:

Wynn Resorts (WYNN) and Las Vegas Sands (LVS), 3/26/19–4/9/19. Wynn Resorts (WYNN) and Las Vegas Sands (LVS) price chart. Casinos Royale.

Source: Power E*TRADE


WYNN was up more than 2.5% at the time, perhaps getting an extra boost from an analyst upgrade on a morning that featured a rash of high-profile downgrades.1 The stock has rallied more than 20% since breaking out of a consolidation on April 1, and LVS is up more than 10% since then.

Earlier in the year, some Street firms had pointed to casino operators as potential outperformers on anticipation of strong industry revenue in Macau.2 A former Portuguese colony and now special administrative district on the coast of China, Macau is the biggest gambling destination in the world, out-earning even Las Vegas. As a result, analysts frequently look to gaming profits there as a bellwether for the industry as a whole. Yesterday, Jefferies Group bumped up WYNN from “neutral” to “buy” in part to “better than expected” Macau gambling revenues, as well as signs of a Chinese economic rebound.3

Wynn Resorts (WYNN), 2/16/18–4/9/19. Wynn Resorts (WYNN) price chart. On the rebound.

Source: Power E*TRADE


Both LVS and WYNN took their lumps with the rest of the market in 2018; the chart above shows WYNN was more than cut in half (from around $202 to $90) between May and December last year, a sell-off that may have been exacerbated by sexual harassment charges leveled at former chairman Steve Wynn, who is no longer with the company. Oversold? After testing its October lows in late December, the stock has rallied more than 50%. That’s hot.

Which is why experienced traders may be looking for pullback opportunities to catch potential WYNN upside, and keeping an eye on the company’s next earnings release, currently scheduled for April 24 (two weeks from Wednesday).

Market Mover Update: May WTI crude oil futures (CLK9) topped $64/barrel for the first time since November 5, which likely helped make energy the strongest S&P 500 (SPX) sector for the day. In the aftermath of last Thursday’s test of support and upside pivot, gold futures also got out of the gate quickly, rallying above $1,305/ounce in early trading amid reports the People’s Bank of China was building its gold reserves.4

Boeing (BA) descended more than 4% amid news it would trim production of its 737 MAX 8 airliner.5

Today’s numbers (all times ET): NFIB Small Business Optimism Index (6 a.m.), JOLTS (10 a.m.).

Today’s earnings include: Shaw Comms (SJR), PriceSmart (PSMT), WD-40 (WDFC).

 

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1 CNBC.com. There were a ton of big analyst calls about major stocks on Monday. Here are the highlights. 4/8/9.

2 TheFly.com. Morgan Stanley raises Macau casino operator targets on higher mass forecast. 3/6/19.

3 Barron’s. Wynn Resorts Stock Is on a Tear. This Analyst Expects More Gains. 4/8/19.

4 Investor’s Business Daily. Stocks Edge Lower; Boeing Weighs On Dow Jones, Snap Stock Soars. 4/8/19.

5 Bloomberg. China Is on a Big Gold-Buying Spree. 4/8/19.

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