Is Melco’s Recent Momentum More Than a Lucky Streak? JP Morgan’s Upgrade Signals Opportunity in the Casino Sector

Melco Resorts & Entertainment Limited (MLCO) operates integrated resort casinos across Asia, with its flagship properties in Macau—a global hub for high-rolling gaming and luxury tourism. The company’s revenue model is built on gaming tables, slots, luxury hotels, entertainment, and retail. On July 1, 2025, JP Morgan upgraded Melco from “Neutral” to “Overweight,” setting a price target of $9.50. With the stock trading at $7.82 during extended hours, the upgrade points to a potential 21.5% upside, catching the attention of investors focused on the global gaming sector.

Analyst upgrades—especially from a heavyweight like JP Morgan—often act as inflection points for sentiment and liquidity, drawing institutional flows and sparking a re-evaluation of risk/reward. In Melco’s case, the upgrade comes amid notable price strength, high trading volume, and renewed sector optimism, raising the question: is this just a short-term rally or the start of a sustained recovery?

Key Takeaways:

• JP Morgan’s upgrade to "Overweight" sets a $9.50 target, implying a 21.5% potential upside from current levels.

• Shares have rebounded strongly, rising over 8% in early trading.

• Recent news spotlights Melco as undervalued and benefiting from improving gaming sector trends despite macro headwinds.

• Technical indicators show a bullish setup, with the stock above both short-term and long-term moving averages and a high RSI, indicating strong momentum.

Why This Upgrade Matters: Sector Leadership in the Spotlight

Melco Resorts & Entertainment Limited is a leading developer and operator of casino gaming and entertainment resort facilities in Asia. The company’s properties, such as City of Dreams and Studio City in Macau, draw VIP and mass-market gamblers from China and beyond. Melco’s business model is capital-intensive but offers high operating leverage: when volumes recover, margins and cash flows can rise steeply. The company’s performance is closely tied to the health of the Macau gaming market and the broader regional tourism ecosystem.

JP Morgan’s upgrade is especially significant in this context. As one of the world’s most influential investment banks, JP Morgan’s research desk has a reputation for in-depth sector expertise, rigorous financial modeling, and strong connections with institutional investors. Their move from “Neutral” to “Overweight” not only reflects optimism on Melco’s recovery trajectory but also has the power to reset market expectations and drive new flows into the stock.

Analyst Upgrade and Firm Background

JP Morgan is a top-tier global financial institution with a long-standing presence in Asian gaming and hospitality coverage. Their research is widely followed by both US and Asia-based investment managers. By upgrading Melco to “Overweight” with a price target of $9.50, JP Morgan is signaling high conviction in Melco’s near-term prospects. This isn’t a routine call: it aligns with recent positive momentum and suggests that Melco’s fundamentals are beginning to outpace prior consensus.

JP Morgan’s credibility in the space is further reinforced by their data-driven approach, market access, and the tendency for their upgrades to catalyze outsized stock moves, particularly in liquidity-sensitive names like Melco. The bank’s price target implies confidence in both the company’s operational recovery and the resilience of Macau’s gaming sector, even as the market digests ongoing regulatory and geopolitical risks.

Stock and Financial Performance: Signs of a Turnaround?

Price Action and Technicals

• Current price (early trading): $7.82, up 8.16% from previous close

• 52-week range: $4.55 (low) to $8.90 (high), with the most recent rally pushing toward the upper end of this band

• 20-day EMA: $6.70; 20-day SMA: $6.53

• Recent RSI: 78 (overbought territory, indicating strong bullish momentum)

• Volume: Recent session shows 133,686 shares traded—low relative to the year’s average, but recent spikes suggest increased institutional interest

One-Year Trend Analysis

Melco’s stock has experienced significant volatility over the past year, with more down days (135) than up days (112), reflecting ongoing uncertainty in Macau’s post-pandemic recovery. However, the average daily price change and recent moves suggest bullish momentum is returning. Technical indicators show the stock is currently trading above both its short- and long-term moving averages, and the RSI indicates a potential overbought condition—typically a sign of strong, sustained buying interest rather than mere speculation.

Financials

• Recent revenue and earnings: While the most recent quarterly results showed ongoing pressure from regional macro headwinds, Melco has stabilized its cash flow and improved efficiency across its properties.

• Operating leverage: As tourism and gaming volumes recover, Melco is positioned to scale profits rapidly, provided no further regulatory disruptions emerge.

Potential Upside: What Does 21.5% Mean for Investors?

With the stock at $7.82 and JP Morgan’s target set at $9.50, investors are looking at a potential upside of 21.5%. This is a significant premium, especially in the context of a sector that has been battered by macro and regulatory headwinds. JP Morgan’s “Overweight” rating gives institutional investors a green light to rotate back into Melco, which could drive further price appreciation if Macau’s gaming recovery continues to gain traction.

The magnitude of this upside suggests JP Morgan sees more than just a cyclical bounce—potentially a re-rating of Melco’s earnings power or a shift in the risk/reward calculus as Macau stabilizes. For investors, the risk is that the rally could pause if sector momentum fades or regulatory risk re-emerges, but the reward is a return to pre-pandemic valuation multiples if trends persist.

Recent News Flow: Undervaluation and Industry Tailwinds

Recent coverage underscores Melco’s growing appeal:

• Zacks Investment Research highlighted Melco as potentially undervalued, noting that “earnings estimate revisions and strong momentum trends underscore [MLCO] as a strong pick.” (source)

• Zacks also named Melco among "3 Gaming Stocks to Add to Your Portfolio Despite Industry Headwinds," emphasizing robust online betting demand and improving industry trends. (source)

• CNBC Fast Money included MLCO as a “final trade,” highlighting its growing profile among active traders. (source)

“Robust online betting demand bodes well for the Gaming industry. Stocks like MLCO… benefit from improving industry trends.”
— Zacks Investment Research

This news flow is notable for its consistency: multiple independent sources are converging on the view that Melco is not only recovering, but potentially undervalued relative to its growth prospects. This supports JP Morgan’s bullish stance and suggests that the market may be catching up to the underlying fundamentals.

Technicals, Sentiment, and Market Structure: Not Just a Flash in the Pan?

• Technical momentum: The stock’s current RSI above 77 and price strength above the upper Bollinger Band suggest institutional accumulation and a potential breakout, though caution is warranted as overbought conditions can precede short-term pullbacks.

• Volume: While the most recent volume was light, the stock saw a major volume spike earlier in the year, indicating that large players are active and could return if the rally accelerates.

• Sentiment: The sentiment ratio (up days vs. down days) has improved over the last 30 sessions, reflecting renewed optimism as sector headwinds abate.

Analyst Confidence: Why JP Morgan’s Endorsement Matters

JP Morgan’s upgrade carries significant weight due to its deep industry ties, global reach, and history of influencing sector flows. Their call aligns with technical and fundamental data showing Melco’s recovery is gaining traction. Historically, JP Morgan’s upgrades in the gaming and leisure sector have coincided with sustained rallies—especially when paired with sector-wide tailwinds and improving fundamentals, as is the case here.

Risks and What Could Change the Story

While the setup is bullish, investors should remain aware of the following risks:

• Regulatory uncertainty: Macau’s gaming laws and license renewals remain a lingering concern.

• Geopolitical risk: China’s policies on outbound tourism and capital flows can shift abruptly.

• Valuation risk: If the recovery stalls, Melco could revert to lower multiples, erasing the projected upside.

• Technicals: The high RSI suggests potential for a short-term pullback, even if the long-term trend remains intact.

Conclusion: High-Conviction Upgrade with Asymmetric Upside

JP Morgan’s “Overweight” upgrade of Melco Resorts is more than a routine ratings change. Backed by strong technical momentum, improving sector fundamentals, and a compelling 21.5% potential upside, this call positions Melco as a high-beta recovery play for investors. The recent convergence of institutional attention, positive news flow, and sector tailwinds suggests that Melco’s rally could be more than just a lucky streak. For those willing to navigate the volatility, the odds may finally be tilting in their favor.