Melco Resorts Raises Price Target to $12, Maintains Positive Outlook

Susquehanna has raised Melco Resorts' price target to $12 from $10, maintaining a Positive outlook. The company's strong Q2 performance was driven by Macau operations. Melco Resorts operates in Macau, the Philippines, and Cyprus, with 81% of adjusted EBITDA from Macau. The company's revenue growth has been positive over the past year, but its financial strength is a concern due to a low Altman Z-Score and high debt-to-equity ratio.

Melco Resorts & Entertainment (MLCO) reported robust second-quarter (Q2) 2025 financial results, with revenue growth driven primarily by its Macau operations. The company's adjusted earnings per share (EPS) of $0.01 missed analyst expectations, but the overall performance was positive, leading to a 4.3% increase in shares following the announcement [2].

Revenue for the quarter ended June 30, 2025, was $1.33 billion, surpassing the consensus estimate of $1.24 billion and representing a 15% increase from the same period last year. Adjusted EBITDA grew 24.1% year-on-year to $352 million, while gaming revenues rose 16.2% to $1.10 billion [1].

City of Dreams Macau, the company's flagship property in Macau, generated $710.5 million in operating revenue, up from $576.4 million a year earlier, with Adjusted EBITDA rising to $225.6 million from $165.1 million in the second quarter of 2024 [2]. Studio City, which no longer runs VIP gaming tables, reported a 6% year-on-year and 7% quarter-on-quarter increase in GGR to $360 million, with Adjusted EBITDA rising 33% year-on-year and 8% sequentially to $105 million [1].

However, Melco's operations in the Philippines and Cyprus continue to face challenges. City of Dreams Manila reported a 9% year-on-year decline in GGR, while City of Dreams Mediterranean saw decent growth in gaming revenues but rising costs impacted profitability [1].

Susquehanna has raised Melco Resorts' price target to $12 from $10, maintaining a positive outlook. The company's strong Q2 performance was driven by Macau operations, which account for 81% of adjusted EBITDA. While revenue growth has been positive over the past year, financial strength remains a concern due to a low Altman Z-Score and high debt-to-equity ratio [3].

References:
[1] https://asgam.com/2025/08/01/melco-beats-forecasts-again-in-2q25-as-macau-resorts-drive-16-increase-in-gaming-revenues-to-us1-1-billion/
[2] https://www.investing.com/news/earnings/melco-resorts-shares-rise-4-as-revenue-tops-estimates-on-macau-strength-93CH-4163239
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3TT2EP:0-melco-resorts-entertainment-ltd-reports-results-for-the-quarter-ended-june-30-earnings-summary/