Texas Capital Securities has officially started its coverage for Melco Resorts & Entertainment Limited (NASDAQ:MLCO), endorsing the stock with a Buy rating and establishing a price target of $11.50. The analyst team points to Melco’s distinctive approach by combining unique non-gaming services with a targeted premium mass-market strategy, which positions the company favorably as Macau experiences record visitor numbers within what the firm characterizes as a "K shaped China economy."
The research underscores that Macau’s gross gaming revenue (GGR) has been steadily closing in on the pre-pandemic 2019 benchmarks, with projections indicating growth rates surpassing 10% throughout most of the first half of 2026. This outlook suggests a continued positive trajectory for the region’s gaming sector.
Furthermore, Texas Capital Securities anticipates that the existing elevated levels of player reinvestment are temporary. The market dynamics are expected to gradually shift towards competition driven primarily by the quality of product and service offerings, an environment where Melco is believed to hold a competitive advantage. This potential transition could enhance Melco's market position as other operators adjust to the evolving demands.
From a valuation perspective, Melco is trading at an estimated 6.3 times enterprise value to EBITDA for 2026, which represents a discount of 3.7 multiples compared to its own one-year forward average from 2017 to 2019 prior to the COVID-19 pandemic and is also 2.8 times lower than the current average valuation among its industry peers. This gap suggests potential upside in valuation if Melco capitalizes on the anticipated market recovery and competitive advantages.
The analysis provided by Texas Capital Securities highlights important considerations for investors, particularly in how Melco’s specialized non-gaming services and focus on premium mass customers could lead to sustained growth amidst the recovering Macau market. However, investors should note that key factors such as evolving competitive pressures and accurate timing of market recovery will influence the ultimate performance of Melco’s stock.