How Strong Q2 Results and Sri Lanka Expansion at Melco (MLCO) Have Changed Its Investment Story

• Melco Resorts & Entertainment recently reported its second quarter 2025 results, posting a 14.5% year-over-year increase in revenue to US$1.33 billion and highlighting record gaming and visitation figures at its Macau properties.
• The company’s expansion into South Asia with the debut of City of Dreams Sri Lanka marks a significant move aimed at capturing new premium customer segments and further diversifying revenue streams.
• We'll take a look at how Melco's successful entry into Sri Lanka enhances its investment narrative and future growth potential.

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What Is Melco Resorts & Entertainment's Investment Narrative?

To be a shareholder in Melco Resorts & Entertainment, you need confidence in the company’s ability to capture premium gaming demand and drive revenue growth, particularly from its flagship Macau properties and emerging markets like Sri Lanka. The latest results show record mass-market gaming activity, strong EBITDA growth, and the successful launch of City of Dreams Sri Lanka, all of which underpin Melco’s focus on premium experiences and geographic diversification. The opening in Sri Lanka could strengthen the investment case but also increases near-term execution risk as the ramp-up in a new market can be unpredictable and dependent on regional demand trends. On the other hand, net income for the recent quarter dipped slightly, highlighting margin pressure even as revenues rise, something to keep an eye on as Melco manages expansion and competitive challenges in Macau. Valuation remains above average, and the share price has already climbed significantly year-to-date, suggesting that much optimism may be reflected. With analysts viewing the stock as close to fair value, the recent news appears positive for near-term catalysts, such as further visitation rebound and new property ramp-up, but margin pressure and successful integration of new projects remain in focus. Yet, with higher revenues not translating into higher quarterly profits, margin pressure is a risk investors should notice.

Despite retreating, Melco Resorts & Entertainment's shares might still be trading above their fair value and there could be some more downside. Discover how much.

Exploring Other Perspectives

The Simply Wall St Community offers three unique fair value estimates for Melco Resorts, spanning from US$1 to US$21.74 per share. While most see potential upside, recent results highlight persistent margin pressure, showing investors can interpret the same news very differently. Explore these varied perspectives for a fuller picture.

Explore 3 other fair value estimates on Melco Resorts & Entertainment - why the stock might be worth less than half the current price!

Build Your Own Melco Resorts & Entertainment Narrative

Disagree with this assessment? Create your own narrative in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Melco Resorts & Entertainment research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Melco Resorts & Entertainment research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Melco Resorts & Entertainment's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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