Wynn Resorts (WYNN) and Las Vegas Sands (LVS)
Like many China-focused stocks, Wynn Resorts (WYNN) and Las Vegas Sands (LVS) have struggled this year. LVS stock is down 21% so far this year; WYNN has declined 37%.
Fears of a China slowdown and its impact on the companies’ operations in Macau (and in the case of LVS, Singapore) are a key worry. But there’s a large political risk here as well. As the U.S. and China continue a trade war, Wynn and Las Vegas Sands could be caught in the crossfire. Both companies’ gaming concessions in Macau expire in 2022.
And those concessions could be bargaining chips for the Chinese central government, particularly given the importance of LVS head Sheldon Adelson to the U.S. Republican Party. At the very least, Macanese or Chinese authorities could renegotiate less-favorable deals for the two U.S. operators.
Those expirations add another layer to the trade war risk already pressuring both stocks. And they make a case for, as noted short-seller Jim Chanos has argued, choosing local operators Melco Resorts & Entertainment (MLCO) or SJM Holdings (SJMHY) instead.
A loss of the concessions would be devastating to the two key U.S. operators (along with MGM Resorts International (MGM), who has smaller relative exposure to Asia). And even if that risk has a low probability of occurring, its effect means investors need to pay close attention.