Texas Capital downgraded Melco Resorts to a “hold” from “buy” on Friday. The change followed weaker visibility for Macau GGR, a hard Q4 comparison, and a race among operators for premium-mass players. Analyst David Bain forecast 2026 adjusted EBITDA of $1.27 billion, down 11%.
Melco Resorts downgrade from Texas Capital moves the rating from “buy” to “hold”. Bain forecast 2026 adjusted EBITDA of $1.27 billion, down 11% year over year, on revenue of almost $4.90 billion. The analyst also revised the October Macau GGR forecast to a 4% decline, from an expectation of flat growth.
- The Downgrade and 2026 Forecasts
- Why October Macau GGR Matters
- The Premium-Mass Competitive Pressure
Texas Capital Securities downgraded Melco Resorts & Entertainment Ltd to a “hold” rating on Friday, downgrading from “buy”. The decision reflected weaker visibility on Macau GGR and a premium-mass segment that is attracting the attention of all six concessionaires.
Bain said the brokerage’s forecasts for Melco’s reported earnings in Q3 and Q4 2026 are “significantly” below market consensus. Adjusted EBITDA estimates were 14% below consensus for the third quarter and 12% below for the fourth.
Texas Capital downgrades Melco Resorts on Macau outlook
The downgrade came with a set of explicit forecasts, not just a warning about sentiment. Bain put Q3 2026 adjusted EBITDA at $261.2 million and Q4 at $280.6 million. The two quarters together produce the $1.27 billion full-year figure, which sits 11% below last year.
Revenue of nearly $4.90 billion falls 5% year over year. As a result, the earnings story is not simply volume; profit is shrinking faster than the top line. Bain’s estimate gap for Q4 is the widest part of the report, with adjusted EBITDA 12% below consensus.
The downgrade also changed the October call. Texas Capital now expects a 4% year-over-year decline in Macau GGR, having previously assumed flat performance. The move reflects a read on demand rather than a change in the company’s own plans.
Why October Macau GGR Matters
October is the month that matters most for the Q4 comparison. Macau GGR grew 15% year over year in the same period of 2025, which makes the next reading a difficult test. UBS noted in a recent memo that consensus for October Macau GGR was “challenging”.
The reading of the market has been unfavourable so far. Macau’s September GGR set the lowest daily average since January 2025. Bain said industry checks in mid-October had not shown a significant year-over-year improvement in demand. Those two signals together pushed the October forecast below consensus.
AGBrief tracks the concessionaires’ monthly performance across the same period.
The Premium-Mass Competitive Pressure
The other driver of the downgrade is competition. Following the decline of the traditional junket system, all six concessionaires have turned toward higher-spending mass-market customers. That shift has raised player reinvestment, and Bain noted that at least one concessionaire recently increased its promotional spending.
Bain did not view the fight as finished. He said the industry checks made the brokerage less optimistic that promotional competition would ease over the coming quarters. The premium-mass segment is where the six operators are spending, and the result is a race to capture the same group of customers.
Melco’s portfolio gives it three integrated resorts in Macau — City of Dreams, Studio City and Altira Macau — plus the Mocha Clubs eGaming machine venues. Outside the city, it runs City of Dreams Manila, City of Dreams Mediterranean in Cyprus, and gaming operations at City of Dreams Sri Lanka.
What Texas Capital Still Sees in the Company
The downgrade is not a verdict on the company. Bain kept a positive long-term view of Melco’s management, casino products and business strategy. He wrote that heightened player reinvestment levels are not permanent and should eventually give way to competition based on product and service, which he argued would benefit Melco.
The 2026 forecast is the near-term problem. Bain expects Melco to gain Macau market share in 2027, supported by enhancements to its properties. That makes the current downgrade a statement about this year’s numbers rather than a loss of confidence in the long-run plan.
Frequently Asked Questions
Why did Texas Capital downgrade Melco Resorts?
Texas Capital cut Melco Resorts from “buy” to “hold” on Friday, citing weaker Macau GGR visibility, a hard Q4 2026 comparison and a race for premium-mass players. Analyst David Bain forecast adjusted EBITDA of $1.27bn for 2026, down 11% year over year.
What EBITDA did Texas Capital forecast?
Bain forecast 2026 adjusted EBITDA of $1.27 billion, down 11% year over year, on revenue of nearly $4.90 billion, down 5%. Q3 was estimated at $261.2 million and Q4 at $280.6 million, both below market consensus.
What did Texas Capital forecast for October Macau GGR?
Texas Capital revised its October Macau GGR forecast to a 4% year-over-year decline, down from an earlier expectation of flat performance. Bain said September GGR had the lowest daily average since January 2025 and mid-October checks showed no meaningful demand recovery.
What is driving the competition for premium-mass customers?
After the junket system declined, all six Macau concessionaires moved toward higher-spending mass-market customers, raising player reinvestment. Bain said one concessionaire had recently raised promotional spending, so the race for this segment is unlikely to calm in the near term.
Does Texas Capital still believe in Melco’s strategy?
Yes. Bain kept a positive long-term view of Melco’s management, products and strategy. He expects the company to gain Macau market share in 2027 as player reinvestment falls away and competition shifts toward product and service. The downgrade is about 2026 earnings.
Which Macau properties does Melco Resorts operate?
Melco Resorts operates City of Dreams, Studio City and Altira Macau, plus the Mocha Clubs eGaming machine venues. Outside Macau, it runs City of Dreams Manila, City of Dreams Mediterranean in Cyprus, and gaming operations at City of Dreams Sri Lanka.
This article has been thoroughly researched and reviewed by the CasinoBait editorial team to ensure accuracy and relevance for Asian casino players.
