The global economy was hit with a 20% decline due to massive lockdowns and restrictive measures imposed because of the coronavirus pandemic. Many companies, including those in the gambling industry, are questioning the future and the financial impact it will have, and MGM Resorts International and Las Vegas Sands stand as two giants whose values are fluctuating according to Forbes.
Casino stocks are facing a decline during the virus outbreak. Las Vegas Sands stocks have fallen by almost 26% since February but with only 10% exposure to Las Vegas, while MGM Resorts has fallen by 53% yet the city generated 50% of the company’s revenue in 2019.
Sands also has an advantage over MGM due to its presence in Macau, where the company has a 45% share of the mass baccarat market. Despite the restrictions, baccarat itself reportedly outpaced the Macau gaming market, with a 20% annual growth rate.
MGM only holds 10% of Macau’s market share as it focuses on Japan’s integrated resorts. But the current decline increases the risk that comes with a new project.
Forbes speculates MGM’s high exposure to the US market could hinder its growth as well. Despite generating $1.8bn of operating cash flow, with $13bn in total revenue, MGM has a long-term debt of $15bn.
Las Vegas Sands outperforms MGM with $3bn of operating cash flow yet total revenue for Sands was reportedly equal. Sands also holds lesser debt with $12bn, but its strong presence in Macau will likely help the company push forward successfully.
