Macau casino stocks sank the most since March 2022, led by slump in Wynn Macau Ltd., as disappointing earnings cast doubts over the pace of recovery in the world’s largest gambling hub.

Wynn Macau tumbled more than 13% on Friday, after third quarter earnings missed estimates, dragged by higher-than-expected operating expenses. The drop weighed on a Bloomberg gauge of gaming operators in the city, which plunged as much as 7.2%.

“The stock is now in a ‘show-me’ bucket for many, making it volatile near-term until it can prove itself again, such as through its fourth quarter print,” wrote JPMorgan Chase & Co analyst DS Kim in a note.

Macau’s casinos have largely stayed on a recovery path this year, with the city’s gaming revenue returning to 74% of pre-pandemic levels last month as tourists flocked to the hub during China’s Golden Week holiday. Still that has not been enough to reassure investors, who remain concerned over crackdowns and weak consumption from China.

“Despite the ongoing Macau gaming revenue recovery to 2019 levels, the sector continued to be dragged down by perceived risks from China macro market headwinds,” wrote Jefferies analyst Andrew Lee.

China’s crackdown on high-rollers has diminished the VIP sector that contributed half of Macau’s gaming revenue before Covid. Since then, the city has been pivoting to mass-market tourists who have become a key indicator of casinos’ profitability.

Earlier this week, Melco Resorts & Entertainment Ltd. slumped after missing estimates. On Thursday, MGM China Holdings dropped after posting better-than-expected earnings, as investors focused on slower growth ahead.

Shares of most operators have been in a downward trajectory in past months despite repeated bullish calls from analysts. The sector is trading around 15 times forward earnings, according to figure compiled by Bloomberg.

--With assistance from Shirley Zhao.