In a recent development, Texas Capital Securities has adjusted its investment stance on Melco Resorts & Entertainment Ltd, moving it to a “hold” rating from its previous “buy”. This shift in recommendation stems from diminishing clarity on the prospects for Macau’s gross gaming revenue (GGR), alongside increasing competitive pressures for premium-mass players and uncertainties regarding the operator's short-term earnings.
On Friday, analyst David Bain from Texas Capital highlighted that their projections for Melco Resorts' earnings in the upcoming third and fourth quarters of 2026 fall “significantly” beneath what the market anticipates. Specifically, the brokerage's estimates on the company's adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) stand at 14% and 12% below consensus for these periods respectively.
Forecasts indicate that Melco Resorts’ adjusted EBITDA might reach approximately US$261.2 million in the third quarter and rise to US$280.6 million during the final quarter of 2026. Overall, for the entire year, Texas Capital predicts the casino operator will generate an adjusted EBITDA of US$1.27 billion, representing an 11% reduction from the prior year, based on total revenue close to US$4.90 billion, which marks a 5% decline.
Macau Gross Gaming Revenue Outlook and Market Challenges
Texas Capital has also revised its expectations for Macau’s gross gaming revenue in October, now predicting a 4% year-on-year drop instead of a previously anticipated stable performance. This prediction aligns with a recent memorandum from UBS, which hinted at challenging conditions for Macau's gaming revenue estimates in October. Mr. Bain observed that Macau's gross gaming revenue recorded in September reached its lowest daily average since January 2025, and mid-October industry assessments have yet to present noticeable year-on-year demand improvements.
The upcoming fourth quarter of 2026 faces tough comparisons considering the robust 15% year-on-year growth in GGR achieved in the same period of 2025. The report also pointed out that despite an increase in visitors from mainland China to Macau, there hasn’t been a corresponding surge in expenditure among high-value casino players.
"We believe China macro, including prolonged deflationary pressures, sticky property market weakness and lower employment have had an impact on gaming demand in the Macau market," Bain notes. Moreover, "Checks also cite a potential GGR impact from China’s July 2026 20-percent tax on assets in offshore trusts, which has triggered restructuring and some capital liquidation," he adds.
Long-Term Optimism for Melco Amidst Competitive Landscape
The report by Texas Capital also draws attention to the ongoing promotional battles among Macau's six licensed casino operators, emphasizing those targeting the premium-mass segment. This has stemmed partly from the decline of the traditional junket model, prompting casinos to appeal directly to the more lucrative mass-market clients, thereby increasing player reinvestment levels.
During recent evaluations, it was noted that one of the concessionaires has augmented its promotional budget, leading to concerns that competitive promotional activities will persist over upcoming quarters. Despite these immediate concerns, Texas Capital retains a favorable long-term view of Melco Resorts, citing confidence in its management, offerings, and strategic outlook.
"We believe heightened player reinvestment levels are not permanent and give way to a longer-term trend of competition based on product and service, benefiting Melco Resorts," Bain stated.
The analyst expresses optimism that Melco will elevate its market presence in Macau by 2027, supported by the continuous upgrades of its properties. Melco Resorts curates a range of premium experiences across properties such as City of Dreams, Studio City, Altira Macau, along with the Mocha Clubs, and extends its operations beyond Macau with facilities in Manila, Cyprus, and Sri Lanka.
Source: Texas Capital downgrades Melco Resorts on Macau GGR outlook, competition, GGRAsia, October 20, 2026.
Posted by Wizard
Oct 20 2026
Oct 20 2026
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