Melco Stock Undervalued, New Macau Projects Can Provide a Lift

Like other Macau casino stocks, Melco Resorts & Entertainment (NASDAQ: MLCO) is in the midst of a rough stretch, but some experts believe the ingredients are there for a rebound.

Shares of the City of Dreams operator are off 26.55% year-to-date, a slump hastened in part due to the World Cup, but the stock could derive benefit from Melco’s nongaming projects, including the conversion of the 330-room Countdown hotel into an all-suite venue, notes Morningstar’s Jennifer Song.

Melco’s efforts to enhance its nongaming portfolio in the special administrative region (SAR) are crucial because the government there is pushing the six concessionaires to beef up their offerings that aren’t directly tied to casino gaming.

Melco Well-Positioned in Premium Mass Segment

One of the 2026 headwinds encountered by Macau casino stocks is that while visitation to the Chinese gaming enclave is sturdy, gross gaming revenue (GGR) growth is lethargic, indicating that many members of the mass market cohort are visiting Macau, but aren’t wagering while there.

While not completely immune from that scenario, Melco has some protection against it because its primary customer hails from the higher-end premium mass segment, potentially positioning the City of Dreams operator as a credible rebound candidate.

Morningstar’s Song points out that Melco “is ideally placed to benefit” from expected long-term growth in Macau, adding that nongaming enhancements “should strengthen its competitiveness in the premium mass segment and support its mid-to-long term growth outlook.”

Melco, which delivers second-quarter results on Aug. 19, trades around $5.55 at this writing, well below Morningstar’s fair value estimate of $9.

More Melco Catalysts

There’s no denying Melco has frustrated investors, shedding 56.32% of its value over the past three years. However, some analysts believe this is one of the more catalyst-rich Macau casino stocks. Previously, one member of the sell-side community speculated Melco’s Hong Kong-listed parent – Melco International Development (200:HK) – could acquire the casino operator to generate shareholder value.

It’s not a far-flung concept when considering Melco Resorts CEO Lawrence Ho controls the Hong Kong-traded entity. There’s also talk, though unconfirmed at this point, that the casino company could aggressively expand its share repurchase program. It has the resources to do that.

“We think Melco’s liquidity risk is low. The firm has reduced its net debt to USD 5.60 billion as of end-2025, from USD 5.9 billion a year ago,” concludes Song. “As of end-2025, Melco has around USD 1.2 billion in cash and USD 1.2 billion of credit facilities available, totaling USD 2.4 billion. This is above its debt of USD 1.8 billion due in 2027, sharply reducing the firm’s refinancing risk in the coming two years.”