Texas Capital Securities Revises Its Stance on Melco Resorts and Entertainment
Ines Jung · Oct 18, 2026
Texas Capital Securities Revises Its Stance on Melco Resorts and Entertainment
Texas Capital Securities moved Melco Resorts and Entertainment from a Buy rating to Hold while cutting the price target from $8 down to $5.50, and the decision rested on three main factors that include softening gross gaming revenue trends in Macau, differences between the firm's own EBITDA projections and broader consensus numbers, plus the effects of a new 20 percent Chinese tax applied to offshore trust assets.
Details of the Rating Change
Shares of the company trading under the NASDAQ ticker MLCO declined after the announcement appeared, and that movement extended a decline that had already stretched across the full prior year as operators in the region continued to face soft fundamentals. Observers note that the downgrade reflects ongoing pressure on Macau casino operators amid those same soft fundamentals, and the action came at a time when market participants tracked every shift in regional revenue data closely.
Macau Gross Gaming Revenue Trends
Weak Macau gross gaming revenue trends formed one central element in the Texas Capital Securities analysis, and figures from recent periods showed continued softness in visitor spending and table game activity that weighed on overall results for operators like Melco. Data indicates that revenue patterns have remained below historical peaks for an extended stretch, while the variance between actual results and earlier expectations added to the cautious outlook. Those who've followed the sector know that GGR numbers serve as a primary benchmark for performance across the market, and sustained softness in those numbers often signals broader challenges for property operators.
EBITDA Forecast Variance
Variance between Texas Capital Securities EBITDA forecasts and consensus estimates represented another key point cited in the downgrade, and the gap highlighted differing assumptions about cost structures, margin recovery, and operational leverage at Melco properties. Analysts at the firm adjusted their models to reflect more conservative inputs on both the revenue and expense sides, while consensus figures continued to incorporate higher growth assumptions in several cases. This difference in projections contributed directly to the reduced price target, and market participants often watch such variances because they can signal where individual research houses see risks that others may have underweighted.
Impact of New Chinese Tax on Offshore Trust Assets
The 20 percent Chinese tax on offshore trust assets introduced an additional layer of consideration, and the policy change affects how certain high-net-worth individuals structure holdings that have historically supported gaming and entertainment spending in Macau. Implementation details around the tax created uncertainty for operators who rely on that customer segment, and the adjustment to the price target incorporated potential effects on future demand patterns. Experts have observed that tax policy shifts in mainland China can ripple through to regional gaming markets quickly, and the timing of this particular measure aligned with already soft revenue trends to amplify caution among analysts.
Share Price Response and Year-Long Context
Shares of MLCO fell in response to the Texas Capital Securities note, and the decline built on a year-long downward trajectory that had already priced in multiple periods of revenue softness across Macau properties. Trading volume picked up as the news circulated, yet the broader market reaction stayed measured because many participants had anticipated continued pressure on regional operators. Those monitoring the stock observed that the move from Buy to Hold simply aligned the rating with prevailing conditions rather than introducing an entirely new narrative, and the lowered price target of $5.50 reflected updated assumptions across the cited factors.
According to coverage on world casino directory, the downgrade captured a moment when multiple headwinds converged for Melco and its peers, and the combination of GGR softness, forecast divergence, and tax policy effects created a coherent case for a more conservative stance. Data from the period shows that similar adjustments have appeared across other Macau-focused names when regional metrics softened, and the MLCO reaction followed that pattern without deviation.
Broader Pressure on Macau Operators
The move reflects ongoing pressure on Macau casino operators amid soft fundamentals, and that pressure has manifested through reduced visitor volumes, cautious spending by premium players, and slower recovery in certain market segments. Operators have adjusted capital plans and marketing approaches in response, yet revenue trends have continued to lag pre-pandemic benchmarks in several categories. Researchers discovered that policy changes originating outside the gaming sector, such as the offshore trust tax, can compound these operational challenges and influence analyst models in ways that extend beyond day-to-day business metrics.
What's significant is how the three cited factors interacted in the Texas Capital Securities report, and the firm presented them as interconnected rather than isolated issues. Weak GGR trends set the baseline, EBITDA variance highlighted model differences, and the tax policy added a forward-looking uncertainty that justified the Hold rating and reduced target. Market participants who reviewed the note found the logic internally consistent with recent data releases from the region.
Conclusion
Texas Capital Securities downgraded Melco Resorts and Entertainment from Buy to Hold and lowered its price target from $8 to $5.50 based on weak Macau gross gaming revenue trends, variance between its EBITDA forecasts and consensus estimates, and the impact of a new 20 percent Chinese tax on offshore trust assets, and shares of MLCO fell in response while extending a year-long decline. The action underscores the pressure facing Macau casino operators amid soft fundamentals, and the details in the note provide a clear window into how analysts weigh regional revenue data, internal projections, and external policy shifts when updating ratings. Observers continue to track similar developments across the sector as operators navigate the same set of conditions.