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On Monday, Morgan Stanley (NYSE:MS) upgraded the stock rating for Melco Resorts & Entertainment Limited (NASDAQ:MLCO) from Equalweight to Overweight, while adjusting the price target to $6.70, down from the previous $7.50. The upgrade comes in light of Melco’s recent performance and anticipated growth in the coming quarters.
Analysts at Morgan Stanley highlighted Melco’s increased market share in mass gaming revenue (GGR), noting a 30 basis points quarter-over-quarter gain in the fourth quarter of 2024 and continued growth in the first quarter of 2025. The company’s revenue growth of 22.9% in the last twelve months supports this positive trajectory. They project this upward trend to persist into the second quarter of 2025, bolstered by the reopening of the "House of Dancing Water" show in May 2025. This entertainment offering, which initially launched in September 2010, had previously contributed to a significant rise in market share for Melco in 2011 and 2012, and similar positive effects are expected with its return.
The firm’s analysts also anticipate that consensus revisions for Melco may have reached their lowest point. They consider the consensus estimate for Melco’s 2025 EBITDA to be reasonable at $297 million per quarter, a mere 2% increase from the fourth quarter’s hold-adjusted level. According to InvestingPro data, the company’s last twelve months EBITDA stands at $1.03 billion, with a healthy current ratio of 1.2. Moreover, Melco has indicated plans to reduce operating expenses in the first half of 2025 compared to the second half of 2024.
Melco’s strategic moves and the reopening of the "House of Dancing Water" are expected to play a crucial role in the company’s market share growth. Morgan Stanley’s revised outlook reflects their confidence in Melco’s ability to capitalize on these developments and continue to expand its presence in the gaming market. InvestingPro analysis rates Melco’s overall financial health as ’Fair’, with additional insights available in the comprehensive Pro Research Report, which offers deep-dive analysis of this and 1,400+ other US stocks.
In other recent news, Melco Resorts & Entertainment Ltd reported its Q4 2024 earnings, revealing an earnings per share (EPS) loss of $0.05, which did not meet analysts’ expectations of a $0.0047 loss. However, the company exceeded revenue forecasts, achieving $1.19 billion against the anticipated $1.18 billion. Melco Resorts also reported strong liquidity, with $1.3 billion in cash and $3.3 billion in available liquidity, while maintaining a strategic focus on debt reduction. The company expects a decrease in operating expenses to $3.1 million per day in the first quarter of 2025 and further down to $3.0 million per day in the second quarter, attributed to operational optimization measures.
Additionally, Citi analysts recently increased the price target for Melco Resorts to $6.25 from $6.00, maintaining a Neutral rating on the stock. This adjustment follows Melco Resorts’ decision to explore strategic alternatives for its City of Dreams Manila property to adopt an asset-light strategy. The company reported that its Chinese New Year total gross gaming revenue surpassed both 2024 and 2019 figures, with a 17% year-over-year increase in property visitation. Despite these positive developments, Citi analysts remain cautious, reflecting a wait-and-see approach regarding the outcomes of Melco Resorts’ strategic decisions and their impact on financial performance.
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