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On Thursday, Citi analyst George Choi upgraded Melco Resorts & Entertainment Limited (NASDAQ:MLCO) stock rating from Neutral to Buy, setting a new price target of $6.25. The upgrade follows Choi's expectations of the company's first-quarter financial performance for 2025, projecting a revenue of approximately $1,217 million, which marks a 9% increase year-over-year (YoY) and a 2% rise quarter-over-quarter (QoQ). This growth trajectory aligns with the company's recent performance, as InvestingPro data reveals a robust revenue growth of 22.86% over the last twelve months, with total revenue reaching $4.64 billion.
Choi anticipates that Melco's adjusted property EBITDA will reach about $309 million in the first quarter, showing growth of 3% YoY and 4% QoQ. City of Dreams (CoD) is expected to contribute significantly to this performance with an estimated EBITDA of $165 million, up from $154 million in the first quarter of 2024.
Further details provided by Choi include a forecast for Studio City, where EBITDA is expected to show a year-over-year increase to $92 million, compared to $88 million in the same period last year. Meanwhile, Altira is predicted to just miss reaching EBITDA breakeven, and Mocha Clubs are projected to generate an EBITDA of around $6 million.
Melco's operations outside Macau are also part of Choi's analysis. CoD Manila's EBITDA is anticipated to decrease slightly to approximately $35 million, down from $38 million in the first quarter of 2024. The Cyprus operations are expected to maintain a steady performance with EBITDA remaining flat year-over-year at $11 million. These projections contribute to the overall positive outlook leading to the stock rating upgrade for Melco Resorts. For deeper insights into Melco's financial health and growth potential, including 8 additional ProTips and comprehensive valuation metrics, investors can access the full analysis through InvestingPro's detailed research report.
In other recent news, Melco Resorts & Entertainment Ltd reported its earnings for the fourth quarter of 2024, revealing an earnings per share (EPS) loss of $0.05, which was greater than the anticipated loss of $0.0047. However, the company exceeded revenue expectations, achieving $1.19 billion against the forecasted $1.18 billion. Morgan Stanley (NYSE:MS) upgraded Melco's stock rating from Equalweight to Overweight, while adjusting the price target to $6.70, citing the company's increased market share in mass gaming revenue and strategic moves like the reopening of the "House of Dancing Water" show. Meanwhile, Citi raised Melco's price target to $6.25 but maintained a Neutral rating, recognizing the company's exploration of strategic alternatives for its City of Dreams Manila property.
Melco's management reported a 17% year-over-year increase in property visitation during the Chinese New Year, with some days ranking among the top-10 highest for mass drop and gross gaming revenue in the company's history. The company is also planning to reduce operating expenses to $3.0 million per day by the second quarter of 2025, attributed to operational optimization measures. Despite the EPS miss, Melco maintains strong liquidity with $1.3 billion in cash and $3.3 billion in available liquidity. The company continues to focus on debt reduction and operational efficiency as part of its strategic priorities. Analysts from Morgan Stanley and Citi have shown cautious optimism about Melco's future performance, with expectations of market share growth and strategic expansions.
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