Should You Buy Crown Shares at this Price?

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What happened to the Crown share price?

Shares in gaming and entertainment company Crown Resorts [ASX:CWN] went over a cliff this week. Finishing the previous week at around $13, Crown’s shares are struggling to claw their way back to $11. That’s a 16% fall in a short space of time.

It hasn’t been a great couple of years for Crown — its shares are now trading only around half the value of when they peaked at over $18 in 2014.

Despite the fall, though, Crown is back trading where it was in June this year before it announced its demerger plans, which saw the share price rally.

Why did Crown do this?

The massive selloff came off the back of the detention of 18 of Crown’s staff in China. The high-roller VIP market is the most profitable segment for casino operators, and the casinos compete aggressively for their business.

One of the ways the casinos attract clients is by direct marketing in China. The problem is, though, that directly promoting gambling inside China is reportedly illegal. So casino operators market themselves as entertainment resorts instead. This has raised the ire of local authorities.

Without the ability to attract this business, it could put a big dent in Crown’s earnings.

Why now for Crown shares?

The issue for Crown — and other gaming operators — is that nobody knows if this is just a temporary clampdown, or if it permanently changes the way casinos try to attract the high-roller business in the future. Not to mention how long the Crown staff will be detained.

Because of that, working out the financial impact to Crown right now can only be a guess. With hindsight, it may turn out that this selloff produced a good opportunity to buy. However, investors looking to buy into Crown need to be cautious until the situation is resolved.

Matt Hibbard,
Money Morning

About Matt Hibbard

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