Casino stocks are facing a deadly test in the wake of the coronavirus outbreak. Major venues like Las Vegas, Macao, Atlantic City, among others, have been forced to close down operations.
The Indian nations have also been walloped, thus offering no alternatives to big city or riverboat gambling. If the shutdown brought about by the global pandemic extends beyond the beginning of May, the industry could be staring at the bankruptcy of major players.
The measures to contain the spread of the virus have led to lodging, liquor sales, gaming, and entertainment sales hitting an all-time low.
When everything moves back to normal, there are no assurances that clients will come back. There are still lingering fears about air travel and large meetings.
There is also a possibility that fresh outbreaks could persist for several months. We cannot rule out the likelihood of the disease turning into an annual event. It could linger until the population develops immunity.
With each passing day, it is becoming harder to anticipate a situation where these tourist destinations will go back to how they were in the recent past years.
In the United States, the shutdown has distressed almost all the casinos. There are very few casinos that have been able to holdout during this pandemic like Deadwood, South Dakota.
The others have been hit really hard like Wynn Resorts, Limited, and Las Vegas Sands Corp. the pandemic has forced them to shut down their operations in Macao as well as the Las Vegas operations.
On a brighter note, there is a likelihood that the Asian income will be back online sooner than the United States. There are promising signs that the pandemic is winding down in Asian countries.
If you look at the Wynn Resorts stock, it topped up almost 165 USD in 2007 towards the end of the year. In 2008 during the economic collapse, the shares sank into the lower teens.
It then started to recover in 2011 until it hit an all-time high of 249 USD in March 2014. The future does not look very bright with the long-term relative strength cycles foreseeing that all efforts will eventually fail.
Nothing can be done on the buy-side as it will require a buying spike beyond the 50-month exponential moving average of almost 120 USD to ease the bristly technical position.
Las Vegas Sands, on the other hand, barely survived the 2008 economic crash. At the time, they had enormous debt levels incurred in the construction of their Macao projects.
However, the stock recovered gradually during the new bull market. It finally topped out over 50% sell-off retracement heights in the year 2014.
The ensuing downward trend into the year 2016 ended in mid 30 USDs. This completed a trading range that was not tested until this month.
It is also unfortunate that the monthly stochastic oscillator is engaged totally in a bearish cycle that may go on to the third quarter. This has, in turn, raised the odds for a collapse and selling climax into the low single digits of 2009.
With this negative state of affairs, the best that bulls can look forward to is an oversold bounce into new resistance in the 50 USDs.
The pandemic has shattered the casino stocks with the exposure in Las Vegas, Macao, and other hot spots. Cash reserves have also been wiped out by the closure of bars, gaming halls, restaurants, and entertainment.
Investors are advised to take protective measures as most of these operations might not endure the near-term future.