Little went right for the gaming companies in 2020.
Of course, the Covid-19 pandemic severely hurt the group and the entire hospitality sector globally. Business travel and leisure ground to a halt here in the U.S. but also abroad. Flights and reservations were canceled, cruises postponed and vacations put on indefinite hold. Things are improving a bit. We all knew it was a matter of time before the conditions got better, but the question was how much time. It seems this new year holds so much hope and promise for this group if the pandemic is under control.
In the casino business, so much good was going to happen this past year with more states approving gaming statutes, and the popularity of DraftKings (DKNG) and Barstool sports, the online gaming varieties. The big gaming companies stateside like Wynn (WYNN) , Las Vegas Sands (LVS) , Caesars (CZR) and MGM (MGM) were set to thrive from the renewed popularity in gaming. All that fell through the floor with the pandemic, but 2021 is setting up nicely.
Wynn and Las Vegas Sands are the biggest players in Macau, the former Portuguese colony in southern China that is now a special administrative region of that country. The casinos, of course, are subject to strict laws. But with such a large base of visitors to the island, these casinos are set for big profits in 2021. Why is that? The revenue numbers produced in 2020 were awful, most months down 90% or more. That leaves a very low floor for these companies to succeed. As the pandemic starts to subside, I believe that'll happen by mid 2021, we should see crowds start to return to these casinos.
How about the U.S.? There is heavy pent up demand for travel, and nothing better than a weekend in Las Vegas to get the adrenaline flowing. Vegas properties are solid and have weathered many a storm, like the Great Financial Crisis in 2008 and 2009. Companies like Sands were brought to their knees, but bounced back in a big way. This time around, the casino stocks did not fall as much, but still have some work to get done to trade near their highs like many other consumer discretionary names. I look for Wynn to be the best performer in the group with the best margins and income improvement.
The stock chart on the weekly time frame is constructive, recently the price has re-entered a sideways zone last seen in late 2019. That range goes back about 18 months, it's from $95 to $150. We could see a bit more up move and some sideways consolidation into Spring, then have this really open up toward higher levels later in the year. Notice the recent tight base from $70-$95 and a burst upward on strong volume.
The cloud here is about to turn green, which would show a bullish trend on the moving averages. Money flow is now green and strengthening, the relative strength index is not quite overbought, but might be soon. The 200-week moving average is resistance ahead, around the $120 level. That might present a brief pause, but we believe this stock is poised to run fast in the year ahead as gamblers come back to the casinos.
