Wynn Stock Could Be a Winner as Macau VIPs Return, Las Vegas Bounces Back

Posted on: May 7, 2020, 09:26h. 

Last updated on: May 7, 2020, 10:15h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Wynn Resorts (NASDAQ:WYNN) are trading slightly lower Thursday, a day after the company reported a wider-than-expected first-quarter loss. But citing the possibilities of a near-term rebound in Macau, analysts remain enthusiastic on the name.

Wynn May Lead Rebound, Analyst Says
With Macau likely to lead a gaming rebound, Wynn is poised to benefit, says an analyst. (Image: South China Morning Post)

In the first three months of 2020, Wynn Macau and Wynn Palace – the operator’s two properties in the world’s largest gaming center – combined for $489 million of the operator’s $953.7 million in total revenue. Like the other concessionaires there, Wynn is still dealing with the effects of a 15-day closure in February forced by the coronavirus outbreak and lingering travel controls that are preventing many Chinese gamblers from visiting the peninsula.

Throughout this earnings season, gaming companies with Macau exposure are talking about pent-up demand among Asian gamblers, something Wynn executives did on their Wednesday conference call. It prompted discussion that the region will lead a global gaming rebound.

We continue to forecast overall premium mass and VIP play to lead the recovery,” said Roth Capital analyst David Bain in a note provided to Casino.org. “Further, after discussions with industry sources, we believe VIP and premium will have an easier time with player spacing rather than an influx of mass on the main floors.”

Wynn Macau, the company’s China unit, is heavily dependent on high-end players, a group affected by the freeze on the individual visit scheme (IVS). Bain doesn’t expect China “to push a button” on mass IVS relaxation. But even a measured loosening by Beijing could benefit Wynn’s VIP-heavy Macau business.

Relief Is on the Way

Integrated resorts in Macau have been open since late February, but visits remain low due to travel bans. Bain says that situation could ease as soon as later this month, but positive year-over-year visitation numbers probably won’t be seen until early next year.

“Visitation should begin to see some relief in second-half of May as Mainland provinces likely begin to open up / visa programs loosen,” said the analyst. “Visitation inflection will be particularly pronounced when Guangdong, Macau’s largest feeder, relaxes. However, we do not expect sustained positive YoY visitation until February 2021.”

Integral to the Macau rebound thesis is Guangdong province – the mainland region closest to the gaming center – relaxing a 14-day quarantine policy aimed at stemming the spread of COVID-19. Until that happens, gross gaming revenue (GGR) figures are likely to remain bleak. Bain forecasts May and June GGR declines of 70 percent and 53 percent, respectively, and a third-quarter slide of 32 percent.

Vegas Recovery

Las Vegas is inching toward reopening, and Wynn CEO Matt Maddox reiterated on the conference call that he expects some casinos there will be operational late this month, though he’s not sure if just one or both of the operator’s Strip properties will be open.

“We believe WYNN’s low convention weighting and customer quality versus mass quantity should benefit an early recovery in Las Vegas, in our view,” said Roth Capital’s Bain.

The analyst has a “buy” rating on Wynn stock and a $99 price target, implying upside of 26.1 percent from where it currently trades.