December 17, 2020
Casino stocks are riding out a bullish wave as investors anticipate a bright future amid talks of lifting the ban on travel and improving trade relations between the US and China in 2021. Earlier this week, the US began its COVID-19 vaccination program on a limited scale, which the experts hope will soon help the economy reopen in full force.
“Once enough people are vaccinated, the economy can return to normalcy as travel resumes, and people flock to the nation’s gambling hubs. Casinos should have a grand season in 2021”, said CNBC’s Jim Cramer.
The Las Vegas Sands had a poor year in 2020 as the Las Vegas-based casino chain lost over 76% of its business during the first nine months of the year. The company, whose properties include the iconic Marina Bay Sands in Singapore and the Venetian Resorts and Sands Expo in Las Vegas, is heavily reliant on the travel and tourism industry for survival.
While MGM Resorts lost over 62% revenue, Wynn Resorts posted close to 70% decline. Despite the grim numbers and the rising COVID-19 cases in the US, investors are hopeful of a nearly 30% boom compared to previous years in 2021. “The industry posted terrible numbers this year, which means they’ll rebound in 2021. The pent-up demand should more than makeup for lost revenue”, Cramer added.
A major change in the White House next month is also a reason for the optimism in the investment circles. The outgoing President Trump was engaged in a bitter trade war with China, with direct implications on American casino operators in Macau. President-elect Biden plans to resolve the situation to a certain extent.
While Biden unofficially claims he’ll leave an existing 25% tariff on almost half the imports from China, it’s bound to bring a resolution to the current deadlock. The Democrat is likely to take a more subtle approach to the problem, to not spook the world’s second-largest economy.
Crammer believes that Wynn Resorts and Las Vegas stand to gain from the government’s less hostile stance against China. “While I believe that Trump’s trade war was a step in the right direction, Wall Street was scapegoated through the entirety of the trade war. It’s hardly surprising to see most money managers shaky as Biden promises to lower the temperature. That’s another reason why casino stocks have been rallying lately,” he added.
Citing chart data from Bob Lang, the Founder of Explosive Options and a contributor to The Street, Cramer believes casino stocks will continue to fly high through 2021. Lang signals at a bullish trajectory in the casino circuit with a potential double in Wynn Resorts.
“Americans are eager to gamble again, and with Biden at the helm, the situation with China is likely to be handled very differently. The charts never lie, and this time they’re screaming that the trade war with China is almost over, along with the pandemic”, Cramer announced.
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