Wynn Resorts Earns Price Target Boost on Macau Rebound

Posted on: April 10, 2023, 08:03h. 

Last updated on: April 10, 2023, 08:03h.

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

Shares of Wynn Resorts (NASDAQ: WYNN traded modestly higher Monday after a sell-side analyst lifted his price target on the stock, citing a strong rebound in Macau gross gaming revenue (GGR).

Macau stocks
Wynn Palace in Macau. An analyst sees more upside in Macau’s recovery boosting Wynn stock.(Image: Bloomberg)

In a note to clients Monday, JP Morgan analyst Joseph Greff boosted his price forecast on the gaming stock to $141 from $131, implying upside of 28% from today’s close. His price target on Wynn is well above the Wall Street consensus of $120.07.

The analyst expects Wynn Macau and Wynn Palace — the operator’s two venues in the Chinese territory — will notch first-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $163 million on net revenue of $602 million. That puts Wynn on pace for full-year Macau cash flow and sales of $752 million and $2.5 billion, respectively.

In Macau, analysts expect Wynn to post 2023 revenue that’s 66% of what was seen in 2019, prior to the coronavirus pandemic, and earnings before interest, taxes, depreciation, and amortization (EBITDA) that’s 73% of 2019 levels, but there’s potential for those percentages to beat forecasts because Wynn is grabbing market share from Macau rivals.

Wynn Macau 2024 Outlook Compelling, Too

Wynn stock is up 33.28% year-to-date – good for one of the best showings among all gaming equities and S&P 500 members.

That’s also a sign markets may have already priced in the bulk of the good news pertaining to the 2023 Macau recovery. However, there’s potential upside to that thesis because this year’s EBITDA and GGR estimates in Macau leave room for ample growth in 2024 as the special administrative region’s (SAR) gaming industry works its way back to pre-pandemic levels. Greff estimates Wynn will post net revenue of $3.4 billion and EBITDA of $1.2 billion in Macau next year.

We’d like to think our new estimates are reasonably based and not a best-case scenario, so we think there is upward revision potential to these above-consensus forecasts,” noted the analyst.

The all-time high on Wynn stock is around $248 — a level not seen since March 2014.

More to Come for Macau Recovery

Perhaps adding to the allure of Wynn shares is the point that analysts, including Greff, see more ahead for the Macau resurgence.

“The Macau recovery is in its early innings. We believe the present recovery in Macau is being driven by wealthy mainlanders, which is driving higher growth in the premium mass and direct VIP segments, segments in which WYNN has a significant presence and likely allows it, in the near term, to show continued market share gains, relative to 2019,” added the analyst.

Greff’s first-quarter estimates for Wynn and Encore on the Las Vegas weren’t changed, but he did slightly boost his cash flow forecast for Encore Boston Harbor to $58 million from $55 million. In less than four years, that venue has become one of the top-grossing regional casinos in the US.