Stock Market

Why Casino Stocks Soared This Week to Beat Out the Stock Market

What happened

Shares of both Las Vegas Sands (LVS 15.06%) and Wynn Resorts (WYNN 13.17%) finished the week in the black, according to data from S&P Global Market Intelligence, while Caesars Entertainment (CZR 10.36%) erased most of a large deficit after Shanghai officials announced they will end weeks of strict lockdowns and attempt to reopen again in a few days.

Sands ended the week up 1.1% from where it closed last Friday after having been down 12% going into the last day of trading, while Wynn was essentially flat after having been down by a like percentage.

Although Caesars still ended the week off 8%, it had been down as much as 19% during the week, so it made up almost as much ground as its peers.

The inside of an empty casino.

Image source: Getty Images.

So what

China has dealt harshly with its citizens to contain new outbreaks of COVID-19, with the Shanghai population of 25 million people absolutely forbidden from leaving their homes, oftentimes not even allowing for deliveries, leading to massive food shortages. Beijing has been subject to similar forced lockdowns.

It’s having a rippling effect across numerous industries as global trade and supply chains have also been impacted by the lockdowns. According to Reuters, restaurants, malls, and entertainment and tourist venues have been closed, bus, subway, and taxi service has been suspended, and residents have been forced to remain in their buildings with almost daily COVID-19 testing required.

Since the lockdowns began at the end of March, the casino stocks are still down even after Friday’s rally, with Las Vegas Sands off 11%, Wynn down 17%, and Caesars down 28%.

Now what

The reason casinos have fell as hard as they have is because mainland China is the largest source of tourism for Macao, the only place in China where it’s legal to gamble. Shanghai, Shenzhen, and Hong Kong are all major cities that contribute to Macao casino revenue. The lockdowns kept visitors from coming to the casinos.

While easing lockdowns is a positive step, casino stocks will unlikely see any benefit initially, and maybe for some time to come as gambling is not about to be the first thing people who have been short of food and necessities will think about.

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