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Derek Stevens is the owner and CEO of three Las Vegas casinos: Circa Resort & Casino, D Casino & Hotel and the Golden Gate Hotel & Casino. He joins 'Squawk on the Street' to discuss his projection for when casinos will be able to return to full capacity. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
Casino stocks are rallying as investors anticipate a rebound in travel and less rocky trade relations between the U.S. and China in the upcoming year, CNBC’s Jim Cramer said.
The U.S. earlier Monday began inoculating citizens with a Covid-19 vaccine authorized by federal regulators for emergency use, which officials hope will help the country reopen the economy.
“Once enough people are vaccinated … the economy goes back to normal, travel resumes and people start gambling in person again,” the “Mad Money” host said. “That’s why the casinos should have a huge year in 2021.”
Such was the case for Las Vegas Sands, the Las Vegas-based casino operator that lost 76% of business through the first nine months of 2020. The company, which properties include The Venetian Resort and Sands Expo in Las Vegas and the iconic Marina Bay Sands in Singapore, relies heavily on travel and tourism spending.
Revenues at Wynn Resorts were also down more than 70%, while MGM Resorts lost 62% of revenues through September of this year. Despite these tough numbers and Covid-19 cases rising exponentially in the U.S., forward-looking investors have carried their shares nearly 30% higher in the past three months.
“They had absolutely terrible numbers lately, which means they’ll be up against some easy comparisons once we get closer to herd immunity,” Cramer said. “And the pent-up demand is absolutely enormous.”
A transition in the White House next month will also give investors more reason to feel optimistic about casino operators with exposure to China, the country that outgoing President Donald Trump engaged in a tense trade war prior to the coronavirus pandemic. While President-elect Joe Biden plans to leave an existing 25% tariff on roughly half the imports from China, the Democrat is expected to take on a more diplomatic approach that won’t spook investors as did the Trump administration’s hard-line approach to the world’s second-largest economy.
Wynn Resorts and Las Vegas stand to benefit from a less hostile stance against China, Cramer said.
“I think Trump’s trade war was the right move … but Wall Street hated the trade war every step of the way, so money managers are giddy that Biden’s going to lower the temperature,” he said. “That’s another reason why the casino stocks have been flying.”
Citing chart analysis from Bob Lang, the founder of ExplosiveOptions.net and contributor to TheStreet.com, Cramer thinks the aforementioned casino stocks can be high rollers in 2021. Lang pointed out bullish signs in the stock trajectories, including a potential double in Wynn Resorts, which closed at $107.54 Monday.
“Americans are ready to gamble again and, perhaps more important, Biden will have a very different attitude toward China,” Cramer said. “The charts don’t lie and these charts are screaming that the Chinese trade war is about to be over, and so is the pandemic.”
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