Analyst Action Puts Spotlight on Melco Resorts’ Next Act

Melco Resorts & Entertainment Limited (MLCO), a global integrated resort operator with a primary focus on Macau and the broader Asia-Pacific gaming market, has just received a notable analyst upgrade. CLSA, a leading pan-Asian brokerage renowned for its deep sector insights and institutional reach, has shifted its stance from "Hold" to "Outperform" as of September 3, 2025. For investors, such a move is more than a routine recommendation change: it’s a signal that institutional sentiment and sector tailwinds may be shifting in Melco’s favor, potentially opening a window of opportunity in a sector long buffeted by regulatory and macroeconomic crosswinds.

In a year where Macau’s gaming sector has begun to show renewed signs of life, the implications of an upgrade from a heavyweight like CLSA demand a sharp focus. Analyst upgrades are among the most actionable signals for sophisticated investors, as they often precede shifts in both institutional capital flows and broader market sentiment—especially when the upgrade comes from a firm with CLSA’s track record for prescient calls on Asian gaming equities.

Key Takeaways

• CLSA upgrades Melco Resorts to "Outperform" from "Hold," reflecting improved sector outlook and company positioning.

• MLCO shares are trading at $10.04, hovering near 52-week highs, with strong technical momentum (RSI near 88, price above both EMA and SMA).

• Recent news highlights strong institutional interest (Zacks #1 Rank), Q2 earnings outperformance, and renewed debate about valuation.

• The upgrade comes as Macau’s gaming recovery accelerates, and Melco’s financials and operational leverage appear underappreciated.

CLSA’s Upgrade: Analyst Conviction Meets Market Momentum

Why CLSA’s Call Matters

CLSA is widely regarded as the go-to research house for Asia-Pacific gaming and consumer sectors. The firm’s analysts hold significant sway with institutional allocators, and their sector calls have historically aligned with major inflection points in Macau’s gaming cycle. Their upgrade to "Outperform" suggests a conviction that Melco is poised to outperform both peers and market expectations, likely driven by:

• A deepening recovery in Macau’s gross gaming revenue (GGR).

• Melco’s operational leverage and recent cost discipline.

• Positive signals from recent earnings and industry data.

Analyst Confidence and Background:

“CLSA’s sector expertise and institutional influence lend significant weight to this upgrade, especially in Asian gaming.”

Market’s Response: Technicals Flash Overbought, But Sentiment Remains Bullish

At $10.04, MLCO is trading just below its 52-week high (recent high: $10.12), and technical indicators are flashing strong momentum:

• RSI: At 87.95, the stock is in overbought territory, reflecting aggressive buying pressure.

• EMA/SMA: Price is well above both 20-day EMA ($9.33) and SMA ($9.14), confirming trend strength.

• Bollinger Bands: Price is hugging the upper band, signaling momentum but also potential short-term consolidation risk.

Over the past year, MLCO has seen a dramatic recovery from lows of $4.55 (April 2025), with a steady uptrend fueled by both sector and company-specific catalysts. Average daily volume remains robust, and recent sessions have seen spikes in both price and trading activity—coinciding with positive earnings and institutional upgrades.

Financial Performance: Operational Leverage and Macau Recovery Drive Narrative

While detailed financials are not included in this summary, recent earnings coverage (Q2 2025) from Seeking Alpha and Zacks highlights several key points:

• Q2 2025 earnings outperformed street estimates, with management citing improved VIP and mass-market volumes and ongoing cost discipline.

• Melco’s balance sheet remains healthy, with ample liquidity to weather further macro shocks or regulatory changes.

• Management commentary on the Q2 call emphasized ongoing recovery and confidence in Macau’s regulatory environment.

News Flow: Institutional Recognition and Value Debate

Recent headlines underscore the changing narrative:

• Zacks added MLCO to its "Strong Buy" list on August 18, 2025, highlighting both momentum and value.

• A separate Zacks feature (August 26, 2025) questions whether investors are undervaluing Melco, emphasizing positive estimate revisions and earnings momentum.

• The July 31, 2025 Q2 earnings call (Seeking Alpha) featured upbeat commentary from management and probing questions from analysts at CBRE, Morgan Stanley, and Citigroup, further validating institutional attention.

“Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.”
— Zacks Investment Research (August 26, 2025)

Opportunity Assessment: What CLSA’s Upgrade Could Mean for Investors

Valuation and Upside Potential

While CLSA’s explicit price target was not disclosed in this upgrade, the context is clear: with MLCO trading at $10.04 and just off 52-week highs, further upside will depend on sustained Macau GGR recovery and continued operational execution.

• If CLSA’s typical sector price target methodology implies a premium to current levels (often 15–25% above prior trading ranges), near-term upside could be considerable, especially if earnings momentum persists.

• The technical backdrop, with price well above moving averages and near the Bollinger upper band, suggests any pullback could be met with institutional buying.

Sector Outlook: Macau’s Gaming Renaissance

The broader Macau gaming sector is in the early innings of a post-pandemic recovery. With China’s outbound travel normalizing and the government signaling ongoing support for integrated resorts, the setup for Melco is compelling:

• Macau GGR growth has accelerated quarter-on-quarter, with the mass-market segment recovering faster than VIP.

• Melco’s portfolio of premium mass and luxury assets positions it to capture disproportionate share as the market normalizes.

Risks: What Could Derail the Bull Case?

• Regulatory risk: Macau policy is always a wildcard, but recent signals have been constructive.

• Valuation risk: Technical overbought conditions may lead to volatility or short-term pullbacks.

• Macro risk: China’s broader economic picture remains a swing factor for travel and gaming demand.

Conclusion: CLSA’s Upgrade as a Catalyst for Re-Rating

CLSA’s upgrade of Melco Resorts to "Outperform" represents more than just a change in rating—it’s a high-conviction call from a sector specialist at a time when both company and sector fundamentals are turning positive. With technicals strong, institutional sentiment rising, and Macau’s recovery gaining steam, sophisticated investors now have a timely catalyst to reassess Melco’s risk/reward profile. As always, the next act hinges on execution—but with the weight of CLSA’s conviction, Melco’s stock could be setting the stage for outperformance in the months ahead.