Texas Capital Securities Revises Position on Melco Resorts Following Macau Revenue Shortfalls

Texas Capital Securities moved Melco Resorts & Entertainment from a Buy rating to Hold in mid-October 2026 while lowering the price target from $8 to $5.50, and the adjustment came after the firm examined September gross gaming revenue figures from Macau that ranked as the weakest since January 2025. Observers note the decision incorporated several specific factors including differences between the company's EBITDA projections and broader consensus estimates, ongoing deflationary conditions across China, and the introduction of a 20 percent tax on offshore trust assets held by Chinese residents. The downgrade announcement highlighted how these elements together create sustained pressure on operators dependent on the Macau market. Data from regional gaming authorities showed September GGR totals falling short of expectations, which prompted Texas Capital Securities to reassess forward-looking assumptions for Melco's portfolio of properties. Analysts incorporated the variance in EBITDA forecasts directly into their models, producing the reduced price target that reflects lower anticipated cash flow generation over the near term.

Key Factors Behind the Rating Change

Prolonged deflationary pressures in China received particular attention in the report because those conditions have reduced discretionary spending among high-value visitors who traditionally contribute significant portions of Macau's VIP segment revenue. The new 20 percent tax on offshore trust assets adds another layer of complexity since it affects wealth structures commonly used by mainland Chinese patrons, and this policy shift may influence travel and gaming patterns throughout the remainder of 2026 and into 2027. Texas Capital Securities connected these macroeconomic and regulatory developments to Melco's operational outlook, noting that the combination creates headwinds beyond typical seasonal fluctuations.

Market participants observed immediate share price movement following the release, with MLCO declining on the day of the announcement as investors digested the updated valuation. The reaction aligned with broader weakness across Macau-focused gaming stocks, although the Texas Capital move stood out for its explicit linkage to both revenue data and the new tax measure. Industry reports from the period indicate that several other operators faced similar revenue softness, yet the specific EBITDA variance cited for Melco provided additional rationale for the targeted adjustment.

Market Context and Operator Impact

Macau's gross gaming revenue performance serves as a central indicator for companies like Melco because the region accounts for the majority of their earnings. When September figures posted below prior-year levels and fell short of analyst models, the resulting downgrade reflected updated assumptions about recovery timelines. Those who've followed regional gaming trends recognize that deflationary environments in China often translate directly into lower average daily win per table and reduced hotel occupancy at integrated resorts, and the offshore trust tax introduces an additional variable that may affect long-term capital flows from high-net-worth individuals.

Texas Capital Securities emphasized that these pressures appear structural rather than temporary, which justified shifting the rating to Hold and establishing a more conservative price target. The move occurred against a backdrop of other financial institutions monitoring similar metrics, although this particular analysis incorporated the tax policy change as a distinct input. Shares of Melco responded with downward movement that mirrored the revised expectations, and trading volumes increased as market participants evaluated the implications for upcoming earnings releases.

Broader Implications for Macau Operators

Other casino companies with significant exposure to Macau experienced parallel stock movements in the days after the announcement, underscoring how interconnected the regional outlook remains. Data compiled by gaming industry associations shows that GGR weakness in September extended across multiple properties, and the deflationary environment combined with the trust tax creates a challenging environment for capital allocation decisions. Observers note that operators may need to adjust marketing strategies and cost structures to navigate the current conditions, while analysts continue to track monthly revenue releases for signs of stabilization.

The price target reduction from $8 to $5.50 quantifies the cumulative effect of these inputs on projected enterprise value, and the Hold rating signals that Texas Capital Securities sees limited near-term catalysts capable of reversing the identified headwinds. Companies operating in the region face the task of managing expectations around EBITDA generation while regulatory changes in China continue to unfold. Reports from regional business publications indicate that similar tax measures could influence cross-border wealth planning for years ahead, which adds duration to the pressures already visible in September's revenue data.

Conclusion

Texas Capital Securities' decision to downgrade Melco Resorts & Entertainment captures a moment when multiple external factors converged on Macau's gaming sector in October 2026. Weak September GGR performance, EBITDA forecast variances, deflationary trends in China, and the new offshore trust tax together prompted the shift from Buy to Hold along with the lowered price target of $5.50. Share price declines followed the announcement, consistent with the broader market response to updated regional outlooks. Those monitoring the sector will continue to track subsequent revenue reports and policy developments for additional signals about the durability of these pressures.