The deadly coronavirus outbreak has battered worldwide financial markets. U.S. stocks with exposure to China’s hospitality and entertainment industries have been hit particularly hard by mounting travel restrictions and the most extensive quarantine in human history.
Panic-stricken investors are voting with their feet, and this could hand level-headed investors an opportunity to profit from the sentiment-driven sell-off.
Here are three stocks for bargain-hunters to target once the dust has settled.
Wynn Resorts (NASDAQ:WYNN) boasts significant operations in Macao – “the Las Vegas of Asia” – which is located in southern China. But maybe Las Vegas should be called the “Macao of North America.”
In Q3 2019, Wynn generated operating revenues of $1.07 billion from its Macao operations compared to $399.5 million from Las Vegas.
The coronavirus epidemic has drastically reduced the number of Macao tourists during a critical time: Chinese Lunar New Year celebrations. Year-over-year tourist traffic has plunged by 60%.
Additionally, the government shut down facilities hosting public events and performances in a bid to contain the spread of coronavirus from mainland China. This has further complicated the situation for the entertainment and hospitality sectors, with Wynn Resorts being no exception.
WYNN stock has fallen nearly 20% since January 17 when the second coronavirus-related death hit the newswires.
But once the worst is over, the stock should recover. It’s currently a Wall Street darling with a consensus rating of Overweight.
Nearly two-thirds of Las Vegas Sands’ (NYSE:LVS) revenue comes from Macao.
In the most recent fiscal year, 60% of the casino operator’s consolidated adjusted property EBITDA (PDF) was generated from its operations in the region.
Unsurprisingly, the coronavirus disease has hit Las Vegas Sands hard. Since January 17, LVS stock has fallen more than 11%.
Like WYNN, this stock has an Overweight rating, making it ripe for picking once the panic over the respiratory illness is over.
Analysts estimate SBUX generates 10% of its sales in China and up to 15% of its operating income in the world’s second-largest economy.
Starbucks has already shut down all its outlets in Wuhan – the epicenter of the coronavirus outbreak – as well as the entire Hubei province. Its other China locations will likely suffer as traffic restrictions and heightened awareness reduce consumer spending at hospitality establishments.
On Monday, SBUX fell by nearly 4% after the death toll from coronavirus surpassed 100 people.
But the stock still enjoys a Wall Street consensus rating of Overweight and could swiftly rebound after conditions stabilize.
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Last modified: June 24, 2020 1:05 AM UTC