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Why Melco Resorts Stock Was a Lousy Bet Today

What happened

One of the more prominent casino complex operators in the Chinese gambling enclave of Macao, Melco Resorts & Entertainment (NASDAQ: MLCO) took a big hit to its share price on Wednesday. Fears of new lockdowns and stricter testing in the face of the resilient coronavirus were the key reason for this, and at the end of the day Melco stock had declined by 8%.

So what

The coronavirus has been difficult to tackle throughout China, and Macao is no exception. On Tuesday, it was powerful enough for the local authorities to impose a full lockdown on the Grand Lisboa, a large casino resort in the enclave. This move trapped 500 guests inside the complex, and it was the first shutdown of a Macao casino in over two years.

Macao also imposed a lockdown on three floors of a shopping center within the Las Vegas Sands resort Plaza Macao, following the discovery of a coronavirus cluster there.

At the moment, it's uncertain whether further lockdowns -- or perhaps even more sweeping restrictions on commerce -- will be enacted in the enclave. China's government tends to err on the side of caution, however, which is a major reason Melco investors were feeling nervous and eyeing the exit door on Wednesday.

Now what

Like Las Vegas Sands, Melco is knee-deep in the Macao casino market. Its property portfolio is overwhelmingly concentrated in the once hotly thriving enclave. That's why the company has been so badly affected by COVID-19, and the shutdowns and declines in visitor traffic the disease has engendered. It will continue to struggle with this as long as the coronavirus persists in that part of the world.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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