Gambling stocks: These two may have hit bottom, traders say

Casino stocks have been hit hard by closures and lockdowns tied to the coronavirus pandemic.

MGM Resorts led the decline on Friday after disappointing quarterly earnings, while a massive 97% decline in April gaming revenue in gambling destination in Macao highlighted the industry damage.

However, the worst could be over for the casino stocks, according to Boris Schlossberg, managing director of FX strategy at BK Asset Management. He says Las Vegas Sands is the best example of a name on the rebound.

Las Vegas Sands "stands the best chance to rise from the rubble at this point. Yes, absolutely Macao's gaming has just come to a complete standstill. But that's not the first time in that region for people to be dealing with a pandemic. In Asia, I think the population is just much more adaptive, and as soon as there is a green light or even a yellow caution light, they're going to reenter the arena," Schlossberg said Friday on CNBC's "Trading Nation."

LVS generates the majority of its revenue from Macau — 63%. It is one of the most heavily exposed among the U.S. casino names. 

"LVS, which has a very strong balance sheet, is going to really be able to capitalize on the position. So, despite the gloom and doom, I think Asia should rebound first and LVS will be the beneficiary," he added. "In the meantime, I think the fact that they have a very strong balance sheet allows them to opportunistically look for other acquisitions. So, overall long term I think they're going to come out of this a winner."

Craig Johnson, chief market technician at Piper Sandler, has his eye on a different casino stock as best positioned to bounce back.

"When I look at a chart like MGM, there's no doubt that … we got to decide when we want to hold them and when we want to fold them. And when I look at this chart, the way that we recovered off the lows, we started a nice upward trending price channel and we're making a nice series of higher highs and higher lows," said Johnson during the same segment.

Even with Friday's decline, MGM ended the week up more than 7%. However, it remains down 55% for the year. 

"A lot of the bad news has already been discounted into these stocks and they're well off their highs. And [MGM] is one that I would hold. I think the casinos stocks will do well and MGM would be one that I would be buying," said Johnson.

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