Texas Capital Securities Shifts Stance on Melco Resorts Amid Macau Revenue Pressures
Xander Bennett · Oct 17, 2026
Texas Capital Securities Shifts Stance on Melco Resorts Amid Macau Revenue Pressures
Texas Capital Securities adjusted its rating on Melco Resorts & Entertainment from Buy to Hold while cutting the price target from $8 to $5.50 per share during October 2026, and observers note the decision rested on several measurable factors tied to operations in Macau. The firm cited softening gross gaming revenue trends across the region, along with differences between its own EBITDA projections and broader consensus figures, as central elements in the revision. Heightened promotional spending by operators and the introduction of a 20 percent Chinese tax on offshore trust assets further shaped the outlook, according to reports from industry sources.
Details of the Rating Change
Shares of Melco Resorts declined roughly 2.3 percent following the announcement, reflecting immediate market reaction within a sector already facing headwinds. The adjustment occurred as data on Macau gaming activity showed continued softness, with gross gaming revenue figures falling short of earlier expectations for the period. Analysts at the firm incorporated these trends directly into updated models, resulting in the lowered target that now aligns more closely with observed performance metrics rather than optimistic prior assumptions.
Key Drivers Behind the Downgrade
Weak Macau gross gaming revenue trends formed the foundation of the revised position, since monthly reports indicated slower recovery in visitor spending and table game volumes compared with forecasts issued earlier in the year. Variance between Texas Capital Securities' EBITDA estimates and consensus projections added another layer, because internal calculations placed future earnings lower than the average analyst view due to sustained cost pressures. Heightened promotional activity across Macau properties contributed as well, since operators increased incentives to attract customers amid competitive conditions, which compressed margins in recent quarters.
The new 20 percent Chinese tax on offshore trust assets introduced an additional variable, because this policy change affects high-net-worth individuals who often fund travel and gaming activities through such structures. Implementation details released in October 2026 clarified that the levy applies to assets held outside mainland China, prompting some observers to adjust spending projections downward for the luxury segment that Melco Resorts targets. Data from regional tourism authorities showed corresponding shifts in arrival patterns from mainland visitors during the same timeframe.
Market participants tracked the share price movement closely, because the 2.3 percent drop occurred alongside wider industry declines that reflected similar concerns about regional revenue stability. The downgrade highlighted how these elements interact, with promotional costs rising while tax-related changes potentially reduce discretionary funds available for international travel. Those following the stock noted that the new price target of $5.50 incorporates these combined pressures into a single valuation metric.
Market Context and Stock Response
Broader industry pressure amplified the reaction to the Texas Capital Securities note, since several Macau-focused operators reported comparable softness in gross gaming revenue during the preceding months. Figures released by local regulators showed year-over-year declines in certain segments, particularly in VIP play that relies heavily on offshore funding arrangements now subject to the new tax. Melco Resorts' positioning in the premium market segment meant these trends carried particular weight in the firm's updated analysis.
Investors responded by recalibrating positions, with trading volume rising on the day of the announcement as participants digested the revised EBITDA outlook. The move from Buy to Hold signaled a more cautious stance without implying outright negativity, since the firm maintained that the company retains operational strengths in integrated resort offerings. Yet the lowered target reflected a realistic assessment of near-term headwinds rather than long-term structural issues.
Implications for Forecasts
EBITDA variance played a direct role because Texas Capital Securities' models projected slower growth than the consensus average, driven by sustained promotional intensity and the tax policy shift. Observers tracking these estimates noted that the gap widened as actual gross gaming revenue data came in below expectations throughout the summer and early fall of 2026. This discrepancy prompted the firm to align its target more closely with realized results rather than maintaining the prior $8 level.
The combination of factors created a coherent case for adjustment, because each element reinforced the others in the firm's internal review. Promotional activity, for instance, offset some revenue softness in the short term but weighed on profitability metrics that feed into EBITDA calculations. Meanwhile the offshore tax introduced uncertainty around future high-end visitation, which in turn influenced revenue projections for properties like those operated by Melco Resorts in Macau.
Conclusion
The downgrade by Texas Capital Securities captures a moment when multiple measurable pressures converged on Melco Resorts & Entertainment during October 2026. Weak gross gaming revenue trends, forecast variances, increased promotional outlays, and the 20 percent tax on offshore assets each contributed to the shift from Buy to Hold and the reduction of the price target to $5.50. Shares responded with a 2.3 percent decline amid ongoing sector challenges, and subsequent reports from regional authorities continued to reflect these underlying conditions. The episode illustrates how policy changes and operational metrics can intersect to reshape analyst perspectives in the Macau gaming market.