The Zacks Analyst Blog Highlights:Las Vegas Sands, MGM Resorts International, Wynn Resorts, Melco Crown Entertainment and Tesla Motors

May 12, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, May 12, 2014 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Las Vegas Sands Corp. (NYSE: LVS-Free Report), MGM Resorts International (NYSE: MGM-Free Report), Wynn Resorts Ltd. (Nasdaq: WYNN-Free Report), Melco Crown Entertainment Ltd. (Nasdaq: MPEL-Free Report) andTesla Motors, Inc. (Nasdaq: TSLA-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Friday's Analyst Blog:

Casino Stocks Tumble on Casino Crackdown Fears

The bullish run of leading casino operators came to an abrupt halt yesterday when UnionPay -- a state-backed payment card company in China -- announced that it would take adequate measures to restrict illegal money transfers from mainland China to Macau casinos. Any such concerted effort would plug a key source of cash for Macau gamblers.

Share prices of units of Hong Kong-listed Macau companies, which include Las Vegas Sands Corp. (NYSE: LVS-Free Report), MGM Resorts International (NYSE: MGM-Free Report), Wynn Resorts Ltd. (Nasdaq: WYNN-Free Report), and Melco Crown Entertainment Ltd. (Nasdaq: MPEL-Free Report) plunged in response. Also, share prices of Hong Kong-listed SJM Holdings Limited and Galaxy Entertainment Group also declined.

What Led to the Onslaught?

Per Chinese law, visitors from mainland China are allowed to bring in $3,200 to Macau, the world's top gambling destination, and can also withdraw an additional $1,600 per day from ATM's.

The players are legally allowed to use debit cards of state-backed payment card companies like UnionPay to buy goods at a pawnshop and then trade them for local currency at the same store. However, according to Macau officials, players have been found using mobile card-swiping devices in order to get hold of more local currency, which is an illegal practice. The payment card agency believes that this way billions of dollars are being siphoned off illegally from mainland China to Macau.


In order to check money laundering, illegal cash flow and other illegal bank card use, UnionPay International implemented certain risk prevention measures. Also, it keeps a track of large transactions undertaken by merchants and shares all such information with law enforcement bodies.

As a part of this anti-corruption drive, Macau is expected to tighten visa rules (beginning July) for visitors from China, according to investment bank Union Gaming Group. Also, UnionPay targets to track down the non-registered point-of-sale machines (POS), which are used to withdraw cash from UnionPay credit cards.

Impact of the Counter-measures

According to Deutsche Bank AG Hong Kong, funds generated through illegal card swipes amount to $6.0 billion or approximately 12.0% of Macau's annual mass-market chips purchased. It expects that a decline in these funds would dampen earnings before interest, taxes, depreciation and amortization of the six largest casino operators in Macau by 2.0% to 6.0%.


Of late, casino stocks have been in the limelight for some reason or the other. These stocks recently posted solid first quarter 2014 results primarily on solid Macau business. Moreover, a 10.6% increase in Macau gambling revenues for the month of April also had a positive impact on the share price of these companies.

However, prior to that, share prices stumbled on credit growth concerns in China and economic slowdown in the region. The crackdown comes at a critical moment and may dampen investor confidence on the stocks.

According to Nomura Securities, investors are concerned about the situation in China and any negative news from this market would hit casino stock prices. However, given the past trend, Union Gaming indicated that stricter use of cash cards would not curb gamblers' capacity to gamble.

Tesla Faces Sales Restriction in Missouri

After facing sales restrictions in New Jersey, Arizona and Ohio, Tesla Motors, Inc. (Nasdaq: TSLA-Free Report) is now faced with challenges in directly selling its vehicles in Missouri. Legislators are considering to impose a ban on direct sales of vehicles to the public in the state. According to a bill, customers can only purchase new vehicles through middleman franchised dealers.

The original bill, HB 1124, has been in circulation since Dec 2013 and was passed by the House on Apr 17, without any ban on direct sales. Recently, the bill was passed by the Senate with altered language, which is entirely different from the original bill. The original bill dealt with laws regarding all-terrain vehicles, recreational off-highway vehicles, and utility vehicles. While the present law restricts franchisors from competing against their franchisees, the amendment in the bill would prohibit direct selling by any auto manufacturer.

Tesla argues that the new law will help dealers to create a monopoly. Earlier it was put forward that dealers play an important role for the customers by taking care of warranty, recall and other service-related issues with the manufacturer, which is lost in case of direct sales.

Tesla offers its customers a relatively new technology which provides sustainable transportation. Electric vehicles offer more fuel efficiency and better emission standards compared to their gasoline counterparts. It believes that direct sales reduce the price of electric vehicles and facilitate higher sales.  

Tesla has a service center in St Louis, MO, employing 15 people. To date, the company has invested $2 million in the state. The automaker intends to open a larger service center in Kansas City, MO, later in 2014, employing 15 people and thus investing an additional $1 million in the state.

The bill, which is passed by the Senate, needs to have the final vote from the House. Tesla opines that the bill should be properly discussed in public keeping consumer interest on priority, before it is passed.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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