Wynn Stock Offers Upside as Las Vegas, Macau Rebound, Says Argus

Posted on: April 6, 2021, 07:43h. 

Last updated on: April 6, 2021, 10:44h.

Wynn Resorts (NASDAQ:WYNN) stock is primed to benefit as domestic travel rebounds and visitation trends in Macau perk up, according to Argus Research.

In a note to clients today, analyst John Staszak lifts the Encore operator to “buy” from “hold,” while placing a price target of $160 on the shares. That implies upside of 22.1 percent from the April 5 close.

Our upgrade assumes a recovery in the Las Vegas business and growth in Boston, driven by the rollout of coronavirus vaccines and increased leisure travel,” said the analyst.

On Wall Street, enthusiasm for casino operators with Las Vegas Strip exposure is growing. That’s amid an improving economic backdrop and rising vaccination levels. On Monday, Morgan Stanley upgraded Caesars Entertainment (NASDAQ:CZR) and MGM Resorts International (NYSE:MGM), while boosting 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) estimates on Boyd Gaming (NYSE:BYD), Caesars, and Wynn. The impetus for those calls was mounting evidence that the largest domestic casino is healing from the effects of the pandemic.

Macau Still Vital to Wynn Stock Thesis

While there’s budding energy for a return to normalcy on the Strip, Macau remains a vital driver of the Wynn investment thesis.

In a traditional operating environment, Wynn Macau and Wynn Palace combine for roughly two-thirds of the operator’s revenue and EBITDA on a quarterly basis. That makes the Chinese special administrative region by far the most vital market for the company.

“In addition, we expect Wynn to benefit from a recovery in Macau, helped by its focus on the premium mass and luxury markets,” said Staszak.

Macau is on a two-month winning streak in revenue terms, and many analysts are comfortable modeling a second-half recovery in the world’s richest casino market. That outlook is largely rooted in expectations that pandemic-related travel restrictions will soon loosen — a theory that could be tested as soon as early May with the arrival of Golden Week festivities.

For Investors, More to Like with Wynn

Wynn stock is primarily viewed through the lens of brick-and-mortar integrated resort operations. But the company is growing its iGaming and sports wagering footprints.

“The company has also launched its iGaming/sports betting platform in 10 states,” notes Staszak.

This will be the first year online sports wagering and internet casinos will have opportunities to materially impact Wynn’s financial results.

On that note, Argus lowered its 2021 loss estimate on Wynn to $2.70 a share from $2.80. The research firm raised its 2022 earnings per share estimate to $2.00 from $1.85. Shares of the Encore Boston Harbor operator are up 16.17 percent year-to-date and 6.70 percent below the 52-week high.