Friday, August 19, 2022

Las Vegas Sands, Wynn Lure Retail Traders as Stocks Slump

Amid the specter of intensifying regulatory scrutiny in Macau, Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) are two of the worst-performing gaming stocks this month. But that’s not stopping some investors from embracing the casino names.

 

Data from Vanda Research indicates that retail investors this week are buying the dips in LVS and Wynn. Smaller investors flocking to the pair of gaming equities come about a week after the six Macau concessionaires shed a combined $20 billion in market capitalization in a single day amid heightened regulatory fears.

 

Authorities in the special administrative region (SAR) — the world’s largest casino hub — are pushing for “healthy and sustainable development” of the gaming industry. That effort could take various forms, but market participants are increasingly concerned Macau’s government could demand and get more equity in the gaming companies, exert more control over day-to-day operations, and wield more influence on companies’ capital expenditures, including dividend payments.

 

Month-to-date, shares of LVS are off nine percent. The operator runs five integrated resorts in the Chinese territory. Wynn is the parent of the company that controls the Wynn Macau and Wynn Palace venues. It is down 13 percent this month.

 

Retail Traders Embrace LVS, Wynn

The new generation of retail traders is increasingly bold and empowered. They are leveraging technology, internet forums, and stimulus cash to make waves in financial markets. And they’re not afraid to embrace stocks mired in slumps.

 

In our last note, we argued that retail investors’ appetite to buy the dip was waning. That statement wasn’t completely accurate,” Vanda Research senior strategist Ben Onatibia said. “They are still more than willing to buy the dip, but are demanding larger discounts to deploy their idle cash.”

 

For the five days ending Sept. 22, retail traders purchased about $149 million worth of LVS and Wynn combined, according to Vanda. That puts the two gaming stocks among the top 10 equities most bought by smaller investors in recent days.

 

Showing they’re not afraid of China’s regulatory headwinds, non-professional traders are also flocking to Alibaba (NYSE:BABA), the e-commerce giant that’s been punished by a crackdown initiated by the Chinese Communist Party (CCP).

 

Bold, But Risky

It’s often said in financial markets that “fortune favors the bold.” However, boldness isn’t a guarantee of success, and Macau equities could remain vulnerable to significant headline risk.

 

Additionally, retail traders embracing the likes of LVS and Wynn are going up against some professional investors that don’t share the same views. In the wake of the regulatory headlines, multiple banks lowered ratings and price targets on all six Macau concessionaires.

 

Specific to Wynn, Kynikos Associates founder Jim Chanos said earlier this week his firm is short that stock, and that despite recent declines, Wynn isn’t cheap. Chanos said the stock is actually expensive and should be trading at about half of what it goes for today.

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