J.P. Morgan Sees Continued Upside In The Macau SAR-Centric Equities

J.P. Morgan analyst Joseph Greff provides insight on the outlook for gaming and lodging stocks/companies in the fiscal year 2023.
The analyst sees more compelling value and better risk-rewards in gaming versus lodging, given better values and differing sets of investors’ expectations for fundamentals.
Also, the analyst adds that the gaming stocks reflect lower than average valuations, reflecting investor concerns over the sustainability of presently strong spend per visit and material pandemic-related margin gains.
Meanwhile, larger lodging corporations like Marriott International Inc MAR and Hilton Hotels Corporation HLT possess above-average valuations versus history, reflecting a higher set of investor expectations.
The analyst sees continued upside in the Macau SAR-centric equities, Las Vegas Sands Corp LVS, Wynn Resorts Limited WYNN, Melco Resorts & Entertainment Ltd MLCO.
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In gaming, the analyst also likes LV Strip-centric operators, MGM Resorts International MGM and Caesars Entertainment Inc CZR, given attractive valuations and a solid backdrop for the market.
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Within lodging, the analyst lists Wyndham Hotels & Resorts Inc WH and Hyatt Hotels Corporation H as relative outperformers.
U.S. gaming stocks, up until market-wide moves off the bottom in late September and October, have sizably underperformed the S&P 500. It is due to investor concerns that well-above pre-pandemic casino spend per trip and significant pandemic margins gains may not be sustainable given a negative macro backdrop.
On the other hand, Macau, until very recently, had been abandoned by investors and has massively underperformed the rest of the analyst’s coverage universe since the pandemic’s bottom in 2020.
Greff thinks recent policy moves and commentary would suggest China and Macau will gradually improve travel/mobility, setting up a recovery in the 2Q23.
When RevPAR growth accelerates, lodging stocks tend to outperform, says the analyst. looks at lodging as having really attractive growth through the 1Q23.
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Price Action: WH shares are trading lower by 0.07% at $71.28 on the last check Thursday.
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