Melco Resorts Rides Macau's Gaming Revival: JPMorgan's Bullish Call and Concert-Driven Surge

Melco Resorts & Entertainment (NASDAQ: MLCO) has surged 11.5% in a single session this month, fueled by a JPMorgan upgrade and a broader rebound in Macau's gaming sector. The investment bank's “overweight” rating and $9.50 price target—implying a 17.9% upside from recent levels—spotlights the stock's potential as Macau's gaming revenue soars. But behind the numbers lies a story of strategic positioning, event-driven catalysts, and risks tied to China's economy. Here's what investors need to know.

The Catalyst: Macau's 19% Gaming Revenue Jump, Driven by Jacky Cheung

Macau's June Gross Gaming Revenue (GGR) jumped 19% year-on-year to MOP21.06 billion ($2.6 billion), marking its strongest post-pandemic performance. A key driver? The “60-Plus” concert series by Canto-pop icon Jacky Cheung at Galaxy Macau. Analysts estimate the events drew premium tourists and gamblers, boosting foot traffic and high-stakes play.

Citi's survey during the concerts revealed a 16% rise in premium players and a 36% spike in average wagers on the opening night. Total bets surged 58% year-on-year, with “whale” players doubling compared to 2024. This isn't just a one-off: the concerts extended into July, and analysts like Seaport Research now project a 10.2% GGR gain for the month.

Why Melco Stands to Benefit

Melco's portfolio includes major Cotai properties like City of Dreams and Altira Macau, which directly profit from Macau's tourism rebound. The company's focus on non-gaming amenities—luxury hotels, dining, and entertainment—aligns with the sector's shift toward mass-market and high-margin ancillary revenue.

• Strategic Leverage: Melco's exposure to Cotai, where premium tourists and high rollers congregate, positions it to capture growth from events like Jacky Cheung's concerts.
• Earnings Momentum: Q1 2025 results beat estimates, with EPS of $0.12 and revenue up 10.8% year-on-year. Analysts now see annual EPS of $0.16, signaling stabilization after years of losses.
• Institutional Buying: Goldman Sachs and others increased stakes in Q1, with institutions now owning 39.62% of the stock.

JPMorgan's Bull Case: $9.50 Target and the “Overweight” Call

The JPMorgan upgrade isn't just about June's GGR. Analysts see a sustained recovery, with Macau's first-half GGR up 4.4% year-on-year to MOP118.77 billion. Their $9.50 price target—up from $7.20—reflects optimism about:
1. Non-Gaming Diversification: Melco's investments in resorts and entertainment reduce reliance on volatile casino margins.
2. China's Stimulus: Beijing's push to boost tourism and economic confidence supports Macau's role as a “world tourism and leisure center.”
3. Valuation Lift: GuruFocus estimates Melco's fair value at $14.92, implying a 135% upside, though this depends on sustained recovery.

Risks to the Bullish Narrative

• Regulatory Overhang: The phase-out of third-party satellite casinos by year-end could disrupt smaller operators but may benefit Melco, which controls its properties.
• China's Economy: A slowdown in Chinese tourism or stricter regulations on gaming could cap Macau's recovery.
• High Valuation: Melco's P/E of 60.32 is rich relative to peers, requiring earnings growth to justify the multiple.

Investment Takeaway: Buy the Dip, but Mind the Risks

Melco's stock has already rallied 28% over nine days, but JPMorgan's $9.50 target suggests further upside. The company's strategic assets, institutional support, and ties to Macau's post-pandemic rebound make it a compelling play on regional recovery.

However, investors should:
- Monitor Macau GGR: Sustained monthly growth above 15% would validate the bull case.
- Watch China's Policies: Any restrictions on travel or gaming could reverse momentum.
- Consider Valuation: The stock's high P/E means earnings must accelerate to avoid a pullback.

In a sector still undervalued relative to pre-pandemic peaks, Melco offers a balanced mix of growth and risk. For now, the Jacky Cheung concerts—and JPMorgan's confidence—suggest this is a story worth betting on.

Final Note: Melco's path forward hinges on Macau's ability to sustain its recovery. Investors should weigh the near-term optimism against long-term structural challenges.