In an era where the cost of daily indulgences commands a noteworthy chunk of our change, there exists a tantalizing opportunity concealed within the glitz and clamor of the stock market. Meet Melco Resorts & Entertainment (NASDAQ: MLCO), the casino titan whose stock now sits at an asking price that undersells the cost of a familiar fast-food staple—the Big Mac—or the daily caffeine fix from your go-to Starbucks barista.
Amid the tumultuous waves of economic fortunes, Melco, a purveyor of dreams carved out of steel and marbled luxury in towering edifices, has found its shares dwindling to below the $10 mark, consequently securing a spot on Morningstar’s coveted list of the ten most tempting stocks trading under this modest sum. As fingertips poised above keyboards herald its latest ask hovering around $8.30, investors are presented with a dazzling bargain—though this was not always so.
This descent from grace was no mere slip; after all, Lawrence Ho’s commanding empire once stood tall at approximately $20 per share in the springtide of 2021. Yet a precipitous plunge to the depths of $4.85 in the following summer scribed a less than fortuitous chapter—and with it, Ho briefly vanished from the illustrious Forbes’ rankings, albeit retaining his billionaire status.
But to pin Melco as an emblematic underachiever would be to gloss over the mired performance of Macau gaming equities at large, beleaguered and battered, drawing parallels to epochs marred by crises like the financial maelstrom of 2008 or the onset of a globe-gripping pandemic.
Yet within this sordid tale lies the possibility of resurrection. Like a phoenix poised for rebirth, Melco, as some market seers would have us believe, holds more than meets the eye—a value play shielded behind the veil of its modest cost. Morningstar, employing their analytic acumen, pins Melco’s worth at $12.60, signaling a potential for value recognition to the tune of some 32% underestimation.
To unfold this lucrative prophecy, the dragon of the East—Melco—would have to summon a monumental rally, scaling over half again of its current valuation, a feat not realized since the fledgling months of 2023. Yet hope burgeons eternal. Analyst Jennifer Song of Morningstar conjures a vision of a gaming market in Macau burgeoning intensively, fueled by the burgeoning middle class of China and the scant gaming penetration rate—a stark contrast to the saturated walks of Las Vegas. The planned infusion of luxury hotels promises to beckon larger wallets from far-flung provinces, boosting the fortunes of resort operators like Melco, which boasts a constellation of properties including City of Dreams, Morpheus, Studio City, and Altira.
Macau, a monolith in the world of entertainment and pleasure, is already buoying non-gaming revenues back to their pre-pandemic glory, and gaming revenue teeters on the cusp of eclipsing past zeniths. And from this fertile ground, Melco stakes its claim: with a baptism of swanky new rooming in Studio City phase 2 come 2023, the company perches on the brink of profit surges anew.
With a diversified patron base straddling the mass-market and premium echelons, Melco wards off the volatility that once buffeted the VIP clientele, a demographic still reeling from the aftershocks of contentious junket sector scandals. In this rich tapestry, where risk intersects with opportunity, the savvy investor gazes upon Melco—not just as a mere chip in the high-stakes game of fortune, but a potential treasure trove replete with the promise of untold resurgence.
