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The global gambling market is estimated to be worth $417 billion. Las Vegas is the heart and soul of the gambling economy in the United States, which as a country claims about 25 percent of the world’s gambling profits.
Major casino and resort operators like MGM Resorts International (NYSE:MGM) and Las Vegas Sands Corp. (NYSE:LVS) have strongholds in Nevada’s gambling town, billed as the entertainment capital of the world. The two companies, along with other big names such as Caesar’s Entertainment (NASDAQ:CZR) and Wynn Resorts (NASDAQ:WYNN) fight amongst each other to capitalize on America’s seemingly limitless enthusiasm for gambling.
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But the major players have been down on their luck recently. Shares of MGM Resorts have climbed just 4.77 percent over the last 52 weeks, and only began trading over their 200-day simple moving average in December after dropping below the key level in May. The stock chart for Las Vegas Sands tells a similar story, with shares up just 3.75 percent over the last 52 weeks, and prices are just now flirting with a 200-day SMA that they also dropped below in May.
But the new year is bringing with it some renewed luck and bullish calls from those who watch the industry. Not only are economic indicators in the U.S. plugging away in the right direction, but the world’s second-largest gambling market is boasting some strong growth numbers as well.
Macau, China’s designated gambling region, pulled in $38 billion in annual revenues for 2012, for an annual gain of 13.5 percent. December revenues were particularly strong, climbing 19.6 percent to $3.54 billion, the strongest ever recorded for the month. However, this compares to 42.2 percent revenue growth in 2011, and the dramatic slowdown has caused a headache for investors.
MGM Resorts and Las Vegas Sands both own properties in the region and their misfortune this year is partially due to Macau’s soft growth in 2012. The region relies on high-rolling VIPs for as much as 70 percent of its revenue, and business from China’s wealthy was low for the year. New regulations surrounding wire transfers and relatively slow economic growth in 2012 have helped put the brakes on gambling.
Chinese officials want to keep Macau’s growth in line with general economic growth, which the OECD predicts will kick up to 8.5 percent in 2013 from 7.5 percent in 2012. This level of growth is certainly more humble than the tremendous gains that the region has seen in the past, but the industry still promises lucrative returns for shareholders.
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