Melco Resorts Stock Downgraded: What the Macau Slowdown Means

Dr. Annelies De Vos · 2026-10-17

Texas Capital Securities just downgraded Melco Resorts & Entertainment from Buy to Hold. The price target took a big cut, from $8 down to $5.50. Analyst David Bain made the call on Friday, and the reason is simple: Macau's gaming market is too uncertain right now. That uncertainty is making it hard to predict how much money Melco will actually make. So what's really going on? Let's break it down. ### Why the Downgrade? Bain's concern isn't random. He sees a growing gap between his own profit forecasts for late 2026 and what the rest of the market expects. Specifically, he's looking at EBITDA (earnings before interest, taxes, depreciation, and amortization) for Q3 and Q4 of 2026. His numbers are lower than the consensus, and that's a red flag. On top of that, the firm pointed out "limited visibility" on Macau's gross gaming revenue. In plain English: nobody's quite sure how much money is coming in the door. And when you can't predict revenue, you can't predict profits. That makes analysts nervous. ### What This Means for Melco Melco runs casinos in Macau, and Macau is the gambling capital of the world. But it's also a special administrative region of China, which means it's sensitive to policy changes from Beijing. Lately, there's been a lot of talk about tighter regulations and a slower-than-expected recovery in tourism. For investors, the downgrade is a signal to be cautious. It doesn't mean Melco is in trouble, but it does mean the easy money has already been made. The stock could still go up, but the risks are higher now. > "The market is pricing in a lot of optimism. We're not there yet." — That's the vibe from Texas Capital's note. ### The Bigger Picture Macau's gaming industry has been through a lot. First, the pandemic shut down travel for nearly three years. Then, when borders reopened, everyone expected a boom. But the recovery has been uneven. High rollers are coming back, but mass-market tourists are still lagging. And then there's the regulatory overhang. China has been cracking down on cross-border gambling and money laundering, which affects the high-stakes VIP business. Melco and its peers have had to adapt, shifting focus to mass-market and non-gaming amenities like hotels and entertainment. So when Texas Capital says "limited visibility," they mean it. The old playbook doesn't work anymore, and nobody knows what the new normal looks like. ### What Should You Watch? If you're following Melco or the Macau casino sector, here are a few things to keep an eye on: - **Monthly gross gaming revenue (GGR) reports** – These come out from Macau's regulator and give a real-time pulse on the industry. - **China's policy signals** – Any hint of loosening or tightening travel restrictions will move the stocks. - **Melco's own earnings calls** – Listen for management's commentary on visitation trends and spending per visitor. - **Competitor performance** – Wynn, Sands, and MGM all report too. If they're all saying the same thing, it's a trend. ### Bottom Line Texas Capital's downgrade is a reminder that Macau's recovery isn't a straight line. Melco might be a great long-term bet, but right now, the smart money is waiting for more clarity. If you're an investor, don't panic. Just stay informed and watch the data. And if you're just here for the casino news, well, now you know why the stock moved. It's all about Macau.