Texas Capital Securities Adjusts Melco Resorts Rating on Macau Revenue Concerns

Texas Capital Securities moved Melco Resorts & Entertainment from Buy to Hold in October 2026 while lowering the price target from $8 to $5.50, and observers point to several Macau-specific pressures that drove the change. The firm highlighted weak gross gaming revenue performance across the territory, with September numbers emerging as the weakest since January 2025, and it flagged variance between its own EBITDA projections and broader consensus estimates. Prolonged deflationary conditions in China combined with a new 20 percent tax on offshore trust assets added further weight to the decision.

Details Behind the Rating Change

Analysts at Texas Capital Securities cited multiple data points that showed softening demand in Macau, and the downgrade reflects those metrics rather than any shift in the operator’s long-term strategy. September gross gaming revenue fell sharply enough to mark the lowest monthly total recorded since the start of 2025, and this figure arrived amid ongoing softness that had already appeared in prior months. The firm’s internal EBITDA forecasts diverged from the consensus range compiled by other research desks, prompting a more cautious stance on near-term earnings visibility.

These elements together prompted the Hold rating, and market participants responded by selling shares of Melco Resorts on the day of the announcement. The move fits a pattern seen across several Macau-focused operators as broader economic signals from China remain mixed.

Market Reaction and Sector Context

Shares of Melco Resorts declined following the release, and trading volumes rose above recent averages as investors digested the revised target. Other casino operators with significant Macau exposure also saw modest pressure, although the direct impact remained most pronounced on Melco. Data from regional exchanges indicated that the broader Macau gaming sector traded lower for the session, reflecting the shared exposure to Chinese economic conditions and policy shifts.

Industry reports from the World Casino Directory noted that September revenue figures aligned with earlier warnings about slower recovery in premium mass and VIP segments. Those same reports highlighted how the new offshore trust tax, rolled out by Chinese authorities earlier in the year, had begun to affect booking patterns among certain high-net-worth visitors who previously routed funds through structures now subject to the levy.

Broader Headwinds for Macau Operators

Prolonged deflation in China has reduced the purchasing power of domestic consumers, and this trend has carried through to travel and entertainment budgets that feed Macau visitation. Economic indicators released by Chinese statistical agencies in the third quarter of 2026 showed continued price weakness across multiple categories, and analysts tracking cross-border flows observed corresponding softness in gaming spend. The combination of these macro factors with the specific tax change created a more challenging environment for operators reliant on mainland China traffic.

Observers tracking the sector note that EBITDA variance often signals differing assumptions about recovery speed, and Texas Capital Securities’ more conservative outlook produced the lower price target. The firm’s analysis incorporated updated visitation data and adjusted for the trust tax impact, resulting in a narrower margin of safety at the previous Buy rating.

Conclusion

The downgrade by Texas Capital Securities captures a snapshot of current conditions facing Melco Resorts and the wider Macau market in October 2026. Weak September gross gaming revenue, divergence in EBITDA forecasts, ongoing deflation in China, and the new offshore trust tax together shaped the revised Hold rating and $5.50 price target. Shares reacted with declines on the day of the announcement, and the move aligns with similar pressures reported across other operators with heavy exposure to the region. Updated figures from regulatory bodies and industry monitors will determine whether these headwinds persist into the final quarter of the year.