Investors have been skittish about the Macau casino sector due to the threat of geopolitical tension rising.

However, Jefferies said the revenue outlook for the sector is improving. Macau's gaming revenue for the week ending November 17 was higher than from the week prior. Analyst David Katz highlighted that gaming revenue estimates for the remainder of the month are expected to imply GGR coming in above prior estimates. The current forecast GGR range implies year-over-year of growth +9% to +14%, per Katz.

Macau gross gaming revenue rose 6.6% year-over-year in October to 20.8 billion patacas ($2.6 billion) to roughly match the consensus estimate from analysts. The GGR tally was up 20% from the September total and was the highest since the pandemic shutdown in 2020, according to data from the Gaming Inspection and Coordination Bureau. Macau casinos saw strong traffic during the Golden Week holiday at the beginning of October, and were also boosted by a series of concerts by Hong Kong and Korean musicians in the final week of October.

Last week, the Macau Government announced its gross gaming revenue forecast for FY25 of 240 billion Macau patacas, indicating 11% growth year-over-year growth. The government forecast also implies the region will recover to 82% of 2019 levels while surpassing 2023 revenue figures by 31%. "Furthermore, we anticipate that as the government stimulus and new monetary policy initiatives are implemented, macro pressures could subside resulting in potential upside to the FY25 forecast," noted Katz.

Despite the solid revenue trends, Jefferies believes visibility remains low and, given recent results in the U.S. election, views exposure to Macau as negative for Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN).

Macau-related casino stocks: Wynn Macau (OTCPK:WYNMF) (OTCPK:WYNMY), Wynn Resorts (WYNN), Sands China (OTCPK:SCHYY) (OTCPK:SCHYF), Las Vegas Sands (LVS), MGM China (OTCPK:MCHVF), (OTCPK:MCHVY), MGM Resorts (MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF), (OTCPK:SJMHY), Melco Resorts & Entertainment (NASDAQ:MLCO), and Studio City International (MSC).