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Gaming stocks rally on generally upbeat Macau July trends

Philippe Lopez | AFP | Getty Images

Shares of U.S. casino giants traded sharply higher Monday after several research firms called out signs of strong Macau gaming revenue in the first 10 days of July, saying results were tracking "well ahead of the previous trends."

"According to our industry sources, based on gaming play for the first 10 days of July, gross gaming revenues in Macau for the month is estimated to be tracking up approximately 8.2 percent year-over-year," Telsey Advisory analyst David Katz said in a research note Monday. He said this positive trend includes electronic gaming estimates for July, which would put monthly GGR essentially equivalent to about $2.53 billion.

In early afternoon trading, Wynn Resorts shares were up 5.5 percent and Las Vegas Sands was 4.8 percent higher. MGM shares gained nearly 1 percent.

"These results are well ahead of the previous trends, which have been running at a rate of an 11 percent decline," Katz wrote. "The result is a solid positive data point for the related stocks and is supportive of our positive thesis on MGM and WYNN as well as LVS."

UBS also commented on "a strong start to July" and reiterated the firm's preference for Wynn Resorts and MGM, citing significant property openings by the two gaming giants. Wynn Palace is scheduled to open in early August and MGM Palace is set to open at the end of the first quarter of 2017.

Analysts have suggested that football's European Championship impact was less than originally feared. Historically, there's been a correlation between Macau's gaming revenues and big sporting events since they tend to draw customers away from the casino's table playing.

Yet some analysts are cautioning against too much optimism on summer results and point out there's still weakness seen in Macau's high-end VIP customer sector.

"While investors could be tempted to buy Macau names into the seasonally stronger summer holiday, we continue to believe that it is too early to bottom fish," Credit Suisse's Macau gaming analyst Kenneth Fong said in a note Monday.

Nomura analyst Harry Curtis noted the results for the first 10 days of July included an extra weekend and "adjusting for the benefit of the extra weekend, daily GGR would have been… [running at] the weak run rate last month."

"These results heading into the Wynn Palace and (Sands') Parisian openings are disappointing and show stagnant demand," Curtis said.