Wynn Resorts (NASDAQ:WYNN), along with other casino stocks, faced new troubles going into the week. The company is down in today’s trading session due to the return of COVID-19 in China. Beijing recorded three deaths from the disease recently, the first such deaths seen since last spring. As a result, “temporary” lockdown measures were reinstated in places like Guangzhou, Shijiazhuang, and Zhengzhou. Several schools and businesses are already closed, and Beijing is urging citizens to stay home.
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Wynn was recovering just weeks ago on hopes of loosened restrictions. The latest news will do little to support that. With China still extremely volatile and likely to close at a moment’s notice, the Macau business may be shaky for a while. However, I’m neutral on Wynn. Macau isn’t the only egg in the resort operator’s basket.
Is Wynn Resorts Stock a Buy, According to Analysts?
Turning to Wall Street, Wynn Resorts has a Moderate Buy consensus rating. That’s based on five Buys and three Holds assigned in the past three months. The average Wynn Resorts price target of $85.43 implies 15.2% upside potential. Analyst price targets range from a low of $71 per share to a high of $117 per share.
Wynn currently enjoys some substantial support in investor sentiment. Wynn Resorts has a 9 out of 10 Smart Score on TipRanks, implying that the stock has a good chance of outperforming the market, going forward.
Hedge funds are also turning positive on Wynn, as they added 16,500 shares of Wynn to their collective holdings this quarter. That’s a small upturn, certainly, but an upturn nonetheless.
As for Wynn’s numbers, that’s a less positive picture. Total revenue has been in decline since December 2021. Back then, Wynn posted revenue of $1.04 billion. That fell to $953.33 million in March 2022, then $908.83 million in June, then $889.72 million in the latest quarter.
In an odd corollary, however, EBITDA has been on the rise since that period. Back in December 2021, EBITDA came in at $64.08 million. In March 2022, it jumped to $83.24 million. In June, it was up to $105.09 million, and now, it stands at $131.38 million.
Wynn Has More Than Macau in Play
Granted, Wynn’s loss of any business in Macau will hurt it. Reports note that 70% of Wynn Resorts’ total revenue in 2019 came from Macau operations. This is a problem in general; when the region that is directly responsible for that much income is controlled by people who will shut down everything at the drop of a hat, it’s probably a good idea to expand – and so it is. Reports from just days ago noted that Wynn is set to open a casino in the resort at Ras Al Khaimah in the United Arab Emirates. That almost certainly won’t make up for an operation that’s responsible for 70% of gross revenue, but it certainly is a start.
In fact, reports note that the Wynn Marjan would actually be “somewhat larger” than the Wynn Las Vegas operation. Though given that the Wynn Marjan isn’t set to open until 2026, this may be too little, too late.
However, it certainly doesn’t hurt that billionaire Tilman Fertitta, who has stakes in Golden Nugget Casinos and the Houston Rockets, recently became Wynn’s second-largest individual investor. Fertitta picked up 6.1% of the company by himself. While this does represent a serious potential point of failure—if Fertitta changes his mind, that’s one big sale in progress—it also represents a major vote of confidence in the company.
Conclusion: Deal Yourself in Later
Right now, things are bad for Wynn. The company is trading close to its lowest price targets, and that’s good news for those considering getting in on Wynn Resorts. However, there’s a lot of short-term trouble ahead that suggests declining share prices to come.
Any loss in the Macau business is a sharp stick in the company’s collective eye. Its work to diversify is welcome but slow at best and probably a little too late to do much good in the short term. Throw in the souring macroeconomic picture that suggests some gamblers will be diverting that money away from the casinos in favor of food and gas, and that hurts Wynn too.
Granted, the hurt won’t be universal. Wealthier clients will still pursue recreational gambling, and the desperate will always dream of jackpots. However, for right now, Wynn is facing a downhill market and souring conditions. That’s why I’m neutral on the company. It’s still got room to fall, but when conditions improve, so too will Wynn’s fate.
