It’s been a rough summer of the world’s leading gaming industry stocks. Las Vegas Sands, Wynn Resorts, Melco Resorts have all fallen by double digit percentages from their 2018 highs, and some have stumbled by more than 30% since may.
Those declines have been a bit odd, because they haven’t coincide with a collapse in the economy, nor for gambling in general. But there are a few factors that investors see as increase the risk of gaming companies over the long term.
Macau’s high growth days may be coming to an end in mid 2016, the Gaming revenue began to recover from its Multi layer drought and investors thought that growth trend could continue for a long time. But gaming revenue has stagnated in the chinese territory since early this year.
Macau’s table game limit could also become a constraint. Resorts there are restricted In terms of how many gaming tables they can have, which puts of something of a ceiling on the Gaming revenue they generate.
Competition from near by countries like The Philippines, South Korea and Singapore could be siphoning of customers, spreading gaming revenues over a broader set of casinos. Macau used to be only major gaming hub In Asia, but now the competiton is fierce.
The Cost of business is going up. Gaming Companies have managed their finance well enough that debts isn’t a potential devastating risk to operations.
The future looks murky in Gaming. Sentiment often drives gaming stocks over the short term, and as 2018 has gone, sentiments towards the industry has gotten worse. The good news is that gaming companies are still generating billions in free cash flow, which will continue to fund the dividends that have become a big Value driver for long term investors.