2018 Not a Great Year for Las Vegas Gambling Stocks
Stocks of major gambling operators in Las Vegas performed poorly in 2018, with most companies ending the year with their stocks 30 percent down. This is the worst recorded performance of the same since the Great Recession ten years ago.
In 2018, the Dow Jones U.S Gambling Index, which constitutes the top gambling stocks of Las Vegas, dropped by a staggering 33 percent. For reference, the Dow Jones Industrial Average Index dropped 5.6 percent. The only top gambling company that performed positively was Eldorado Resorts, which rose 9 percent by the year.
The year started on a positive note; decline not expected at first
Initially, the declines weren’t expected. During the start of 2018, gaming stocks performed well as a result of the U.S government passing tax cuts for law corporate and personal income. This resulted in huge one-off profits for casino operators in the gambling capital of the country. Wynn Resorts gained as much as $340 million, while Las Vegas Sands Corp gained $526 million.
This gave people hope that the economy will grow, making companies, as well as citizens, spend more of their money at the casinos in Vegas. During this time, the stock of Wynn Resorts rose 19 percent in just three weeks, while MGM Resorts International saw a 10 percent increase.
Trump’s policy a huge blow to Las Vegas gambling stocks
The impressive performance of the stocks did not last very long. When Trump imposed huge tariffs on $34 billion of goods from China in July 2018, China wasn’t too happy. To make things worse, the U.S government imposed even more tariffs. This spat between the two countries affected gambling in Macau since many big players were taken aback.
Over the next few months, gaming revenue in Macau dropped by 13 percent. As a result, stocks of major companies such as Wynn Resorts and Las Vegas Sands saw huge drops as more than half of their earnings come from Macau. By the end of the year, Wynn Resorts was down 41 percent, while Las Vegas Sands took a 22 percent hit.
Even though the tax cuts were great for the economy as a whole, the Strip suffered. On August 1, Caesars Entertainment Corp. announced that Q3 earnings of the strip would be lower than they hoped for. MGM followed with the same announcement the next day. This alarmed investors, and both these companies started experiencing major drops in their stocks. This trend went on till the end of the year, forcing them and others to close the year on an unsatisfactory note.