Las Vegas gaming companies and resorts were hit hard Monday after announcing temporary closures due to policies to fight the spread of coronavirus.
Wynn Resorts shares (WYNN) fell 24% the day after announcing it would be temporarily shutting its Las Vegas and Boston properties for at least two weeks. MGM shares cratered 33% after making a similar announcement. Harrah’s, Bally’s and Caesars Palace owner Caesars Entertainment (CZR) saw shares fall by about the same margin as investors weighed the revenue hit that would come with the company announcing the suspension of live events at its properties.
With revenue streams looking like they will be disrupted for at least the foreseeable future, investors are weighing which companies might be best positioned to weather the storm. For its part, Caesars announced after the market close on Monday that it had fully drawn down its remaining available capacity under its revolving credit facilities to bolster its cash position and preserve flexibility in the time of uncertainty. Still, however, the company has a larger debt burden than some of its peers and a slightly worse credit rating than Wynn or MGM, according to rating agency S&P.
Despite the moves by some of the largest casinos to curtail or completely suspend operations, not all gaming companies are implementing drastic measures. Palms owner Red Rock Resorts instead announced plans to increase the frequency of its gaming floor and resort cleanings while limiting capacity at some of its restaurants and gaming tables. All slot machines will now be cleaned every two hours.
For now, the Nevada government and the Southern Nevada Health District has not enforced any mandatory closures. That’s unlike the call from New York Governor Andrew Cuomo, who called on all casinos in the state to shut down effective Monday night.
The pressure gaming companies are facing in Las Vegas follows a 15-day closure in Macau that was also a result of coronavirus cases. The hub has become an increasingly important hub for companies like Wynn that have invested heavily in the region. Macau now accounts for nearly three-fourths of the company’s revenue, while Las Vegas Sands says about 60% of its revenue stems from Macau. With the region now back online, it could help alleviate the pain around a Las Vegas shutdown.
For patient investors, the steep collapse that has now amounted to more than 50% monthly losses in MGM’s, Wynn’s, and Caesars’ respective share prices could present a buying opportunity, according to Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber.
“Be patient here because it’s going to take three months to get this market to work this recession in correctly, but boy, oh boy this is as good as it gets for stock pickers like me,” he told Yahoo Finance.
For the Las Vegas economy, however, the temporary hit will likely be substantial with Caesars and MGM already reportedly announcing layoffs due to the slowdown. The hospitality and leisure industry accounts for nearly 30% of employment in Las Vegas, according to recent data.