Bank of America Securities has adopted a more cautious and selective stance on the Macau gaming sector, warning that a tougher growth environment in 2026 could limit upside for casino stocks despite solid near-term performance.
In a research note dated January 14th, the bank highlighted mounting sector headwinds, including more challenging year-on-year comparisons, margin pressures, and uncertainty around longer-term gross gaming revenue (GGR) growth.
As part of this reassessment, Bank of America trimmed its price objective for US-listed Melco Resorts & Entertainment while reiterating a Neutral rating.
The report – authored by analysts Karl Choi, Ronald Leung, Eric Du, and Candice Zhang – noted that while Macau GGR growth is expected to remain relatively strong in early 2026, particularly in the first quarter, the sector is likely to enter a period of range-bound trading as tougher comparisons emerge from mid-year.
‘Much tougher comps starting in June may cap upside potential,’ the analysts wrote, adding that dividend yields of around 4 to 5 percent could provide some support for the sector.
Melco was cited as a case study illustrating both the strengths and constraints facing operators. Looking to last year, Bank of America projects Melco will post slight quarterly growth results from 4Q25 GGR, but expects property EBITDA declined by 12 percent sequentially due to normalization from a higher hold rate in 3Q25 and a rise in operating expenses linked to seasonality and major events. These include costs associated with hosting the National Games and celebrations marking Studio City’s 10th anniversary .
Despite continued strong free cash flow generation across the sector, looking to this year the analysts flagged several ongoing risks. These include limited visibility on sustainable GGR growth, potential unfavorable changes to licensing fees, margin erosion from competitive pressures and a shift toward VIP play, and external factors such as the World Cup in June and July, which has historically weighed on gaming volumes in Macau .
It is also worth noting that confirmed increases in licensing-related fees have pressured sentiment toward some Macau gaming operators. For MGM China, CLSA has said the higher license fees payable to MGM Resorts from 2026 onward are expected to further reduce EBITDA, contributing to downward revisions in earnings forecasts.
