Ticker: NASDAQ: MLCO
Shares of Melco Resorts & Entertainment have surged nearly 51% year-to-date, driven by a strong rebound in Macau’s gross gaming revenue (GGR). Yet analysts believe the rally may be far from over. According to Morningstar, Melco’s strategic developments—particularly in premium-mass market positioning and nongaming diversification—could unlock further upside.
Studio City Phase 2: A Catalyst for Premium-Mass Dominance
Melco’s latest expansion, Studio City Phase 2, is a cornerstone of its premium-mass strategy. The project includes:
- 900 luxury hotel rooms
- A dual indoor/outdoor water park
- Advanced MICE (Meetings, Incentives, Conventions, Exhibitions) facilities
- A suite of nongaming attractions aimed at broadening Macau’s tourism appeal
“These investments not only enhance Melco’s premium-mass offering but also align with Macau’s long-term economic diversification goals,” said Jennifer Song, equity analyst at Morningstar.
Morningstar has set a fair value target of $10 for Melco stock, suggesting it remains undervalued at its current trading price of approximately $8.70.
Beyond Macau: Melco’s Global Growth Story
While Melco remains a key player in Macau’s casino landscape, its international footprint is expanding:
- City of Dreams Sri Lanka officially opened this month, operating under a 20-year license with monopoly status. The property is expected to be a major driver of tourism and job creation in the region.
- A strategic review is underway for City of Dreams Manila, with potential divestiture offering capital redeployment opportunities.
- Analysts have floated the idea of exiting City of Dreams Mediterranean in Cyprus, although Melco has not confirmed any plans.
“Melco’s innovation and leadership in premium-mass gaming, combined with its global expansion strategy, position it for sustained earnings growth,” added Song.
Financial Strength Supports Growth Outlook
Melco’s balance sheet adds further confidence to its growth trajectory:
- Net debt stood at $5.9 billion at year-end 2024
- Cash and credit facilities total $3.3 billion, comfortably covering $1.2 billion in 2025 maturities
- Recent refinancing transactions have improved the debt maturity profile
- A dividend reinstatement could be on the horizon for 2026
“Melco’s liquidity position significantly reduces refinancing risk and supports long-term capital flexibility,” noted Song.
