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On Monday, Citi analysts lowered their outlook on Melco Resorts & Entertainment Limited (NASDAQ:MLCO), downgrading the stock from Buy to Neutral and reducing the price target significantly from $10.00 to $6.00. The revision in the stock’s rating and price target was announced following an evaluation of the company’s position in the competitive Macau gaming market.
The analysts noted their appreciation for Melco Resorts as a leading operator in the Premium Mass segment, which is highly coveted in Macau’s gaming industry. They also commended the company for its aggressive cost-cutting measures, which they believe could continue to contribute to improvements in EBITDA margins. According to InvestingPro data, the company has achieved impressive revenue growth of 50.42% over the last twelve months, though profitability remains a challenge.
Despite these positive aspects, concerns were raised regarding the lack of new product offerings at Melco’s flagship property, the City of Dreams. The analysts expressed worry that Melco Resorts might lose market share in 2025 due to the introduction of new attractions by competitors in Macau. This potential decline in market share has prompted the adjustment in the stock’s rating.
Additionally, Citi mentioned that Melco Resorts has not yet reinstated dividend payments, which adds to the cautious stance adopted by the analysts. The absence of dividends could be a factor for investors when considering the stock’s attractiveness in comparison to its industry peers.
The downgrade reflects the analysts’ revised expectations for Melco Resorts’ performance in the face of these challenges. The new price target of $6.00 represents a notable decrease from the previous target, setting a more conservative valuation for the company’s shares in the near term.
In other recent news, Melco Resorts & Entertainment Limited underwent a rating downgrade from Overweight to Equalweight by Morgan Stanley (NYSE:MS), adjusting the price target to $7.50 from the previous $9.60. The firm indicated a shift in stock preferences within the gaming and hospitality sector, expressing a preference for Sands and Galaxy due to their stronger market share momentum, potential resumption of dividends, and share buybacks from Las Vegas Sands (NYSE:LVS) Corp. Morgan Stanley also highlighted MGM Resorts (NYSE:MGM) International and Wynn Resorts (NASDAQ:WYNN), Limited as more favorable mid-cap options compared to Melco Resorts, citing higher dividend yields and more attractive valuations.
In another development, China’s policy shift towards more accommodating monetary and fiscal policies has boosted stocks with significant ties to the country. Companies such as Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), PDD, JD (NASDAQ:JD).com, NetEase (NASDAQ:NTES), Trip.com, KE Holdings, and Bilibili (NASDAQ:BILI) made substantial gains, as did consumer brands with a footprint in China, including Estee Lauder (NYSE:EL), Nike (NYSE:NKE), Las Vegas Sands, Melco, Wynn Resorts, Canada Goose, Yum China, and Starbucks (NASDAQ:SBUX).
These are recent developments that investors should consider in their assessments of these companies. Morgan Stanley’s downgrade of Melco Resorts and the impact of China’s policy shift on various stocks underscore the dynamic nature of the markets.
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