Bank of America Securities analyst Karl Choi has maintained their neutral stance on MLCO stock, giving a Hold rating yesterday.
Karl Choi has given his Hold rating due to a combination of factors influencing Melco Resorts & Entertainment’s current financial position and market outlook. Despite an unexpected increase in operating expenses in the fourth quarter of 2024, Melco has managed to gain market share in gross gaming revenues, which is a positive sign. However, there is uncertainty about whether this market share can be sustained once operating expenses are reduced as planned in 2025.
Additionally, Melco’s strategic shift towards an asset-light model, including a review of its stake in City of Dreams Manila, could facilitate faster deleveraging if executed effectively. While the company’s valuation appears inexpensive, with a 2025 estimated EBITDA multiple of 7.7x and a cash P/E of 5.2x, Choi maintains a Neutral stance due to investor preference for gaming operators with higher dividend yields in a slow-growth sector. The potential for share buybacks and debt repayment also plays into this cautious outlook.
In another report released yesterday, Citi also maintained a Hold rating on the stock with a $6.25 price target.