J.P. Morgan's latest report issues a warning for Macau's gaming industry, suggesting that the market's growth expectations for 2025-2026 are overly optimistic and urgently need to readjust their forecast models. The investment bank pointed out in its industry analysis report released on Tuesday that, affected by multiple macroeconomic factors, Macau's Gross Gaming Revenue (GGR) may face sustained downward pressure.
Core Forecast Adjustments
The J.P. Morgan analyst team (led by DS Kim) has made significant forecast revisions for Macau's gaming industry:
2025 GGR: Expected to decrease by 1% to $28.4 billion (originally forecasted to grow by 3%)
2026 GGR: Expected to decrease further by 2% to $27.7 billion
EBITDA Outlook: 2025 expected to decrease by 5% to $7.32 billion, 2026 to remain flat
These forecasts contrast sharply with the market's general expectation of 6% annual growth. Analysts state that current market expectations are "out of touch with reality" and fail to fully reflect the changing economic environment.
Key Impact Factor Analysis
The report highlights several structural risk factors affecting the outlook for Macau's gaming industry:
Chinese economic slowdown:
Historical data shows that for every 10 percentage point decrease in GGR, there is a corresponding 5 percentage point slowdown in China's GDP
Regression analysis based on 65 years of US data and 15 years of pre-pandemic Chinese data confirms that GDP growth is a major driver of GGR
US-China trade frictions:
Increased pressure on the depreciation of the yuan
Geopolitical uncertainties affecting high-end customer spending willingness
Changes in capital flows:
Market capital outflow pace is accelerating
Investor sentiment is becoming more cautious
Corporate Ratings and Market Reaction
J.P. Morgan maintains differential ratings for Macau's six major gaming operators:
Overweight: Galaxy Entertainment, MGM China, Sands China, Wynn Macau
Neutral: Melco International
Underweight: SJM Holdings
The report specifically points out that the overall EBITDA consensus forecast may face a 10%-15% downside risk. Analysts advise investors to focus on "real valuations," believing that the current market's speed in adjusting forecasts is too slow, masking the actual investment value of some targets.
Potential Upside Factors
Despite an overall cautious stance, the report also acknowledges that there are positive variables that could improve the outlook:
Chinese government introduces economic stimulus policies
Easing of US-China trade tensions
Macau's local consumer market recovery exceeds expectations
Analysts state: "We are stress-testing assumptions, simulating a worst-case scenario where GGR falls 10% quarter-over-quarter in Q4 2025, to ensure the robustness of our forecasts."
Industry Outlook and Recommendations
J.P. Morgan advises investors:
Reset expectations: Timely adjust growth assumptions to avoid "expectations being out of touch with reality"
Focus on earnings season: First quarter earnings could be a catalyst for market repricing
Select individual stocks: Focus on operators with differential advantages in an overall pressured industry context
As this report is released, Macau's gaming industry is striving to recover from the pandemic's impact. In 2024, Macau's GGR reached 226.8 billion Macau patacas (approximately 26.4 billion euros), a year-on-year increase of 23.9%, but J.P. Morgan believes this recovery momentum may be difficult to sustain. The analysts conclude: "The market needs to take a more pragmatic view of the growth prospects for the next two years."
