Similar to the other casino stocks in Macau, Melco Resorts & Entertainment (NASDAQ: MLCO) is currently experiencing a challenging phase; however, some analysts foresee a potential recovery on the horizon.
Year-to-date, shares of the City of Dreams operator have declined by 26.55%. This downturn, partly influenced by the World Cup, may be offset by Melco’s non-gaming initiatives, including the transformation of the 330-room Countdown hotel into a fully-suited establishment, according to Morningstar’s Jennifer Song.
“Melco is intensifying its focus on non-gaming revenue through the new phase 2 project at Studio City, which features various non-gaming attractions, including 900 luxury hotel rooms, an indoor/outdoor water park, cutting-edge meetings, incentives, conventions, and exhibitions (MICE) space, alongside other entertainment facilities,” the analyst states. “These developments will assist the Macao government in diversifying its economic portfolio and position it favorably for long-term growth.”
Melco’s initiatives to enhance its non-gaming offerings in the special administrative region (SAR) are vital as the local government urges its six concessionaires to enhance their non-gaming portfolios.
Melco Positioned Favorably in Premium Mass Market
One of the looming challenges for Macau casino stocks in 2026 is the sluggish growth in gross gaming revenue (GGR), despite robust visitor numbers to the gaming enclave. This suggests that visitors from the mass market segment are arriving but are less inclined to gamble.
Although Melco is not entirely insulated from this trend, it enjoys a degree of protection due to its primary clientele being from the more affluent premium mass segment, which may position it as a strong contender for a rebound.
Morningstar’s Song emphasizes that Melco “is optimally positioned to reap the benefits” from anticipated long-term growth in Macau, further stating that non-gaming enhancements “will bolster its competitive edge in the premium mass market and support its medium to long-term growth trajectory.”
Currently trading around $5.55, Melco will be releasing its second-quarter earnings on August 19, significantly below Morningstar’s estimated fair value of $9.
Additional Catalysts for Melco
It is undeniable that Melco has disappointed investors, losing 56.32% of its value over the past three years. Nevertheless, some analysts argue this stock is among the more catalyst-rich options in the Macau casino sector. One analyst previously noted the possibility of Melco’s Hong Kong-listed parent, Melco International Development (200:HK), potentially acquiring the casino operator to enhance shareholder value.
This notion isn’t far-fetched, considering that Melco Resorts CEO Lawrence Ho has control over the Hong Kong-listed company. Additionally, there are rumors—albeit unverified—that the casino operator may consider an aggressive expansion of its share repurchase program, a possibility it has the financial resources to pursue.
“We believe Melco’s liquidity risk is minimal. As of the end of 2025, the company has successfully lowered its net debt to USD 5.60 billion from USD 5.9 billion a year prior,” Song concludes. “By the end of 2025, Melco is anticipated to have about USD 1.2 billion in cash and access to another USD 1.2 billion in credit facilities, aggregating USD 2.4 billion. This amount surpasses the USD 1.8 billion in debt due in 2027, significantly decreasing the company’s refinancing risk in the next two years.”