Wynn Resorts Stock Has Look of Value Play, Says JPMorgan Analyst

Posted on: February 28, 2024, 02:02h. 

Last updated on: February 29, 2024, 11:31h.

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

Shares of Wynn Resorts (NASDAQ: WYNN) are higher by 12.8% year to date, an advantage of more than 600 basis points over the S&P 500. But that doesn’t mean the gaming stock lacks value traits.

Wynn Resorts
Wynn and Encore on the Las Vegas Strip. A JPMorgan analyst says the stock offers value. (Image: Luxury Lifestyle Magazine)

In fact, at least one analyst views Wynn as a value play. JPMorgan analyst Joseph Greff extolled such sentiment in a new report to clients. He reiterated an “overweight” rating on the casino stock, while lifting his price target to $123 from $118. That implies upside of about 19.5% from current levels.

(That) takes into account China macro and geopolitical risks, a potential incrementally positive shift in investor sentiment with respect to Macau/China invest-ability, and an underappreciated development pipeline,” wrote Greff.

Macau is Wynn’s largest operating market, and its Wynn Macau unit runs two integrated resorts in the special administrative region (SAR). Recent data indicates that in the Chinese territory, Wynn Macau and Wynn Palace have recently swiped incremental market share from some larger rivals, helped by a strong pivot to premium mass customers.

Wynn Pipeline Underappreciated

As Greff observed, investors aren’t yet fully appreciating Wynn’s product pipeline, which is largely comprised of Wynn Al Marjan Island in the United Arab Emirates (UAE), a project on which construction recently started.

Investors’ lack of enthusiasm for that project may be partially attributable to concerns regarding official approval of casino gaming in the UAE  — worries that were heightened with MGM Resorts International (NYSE: MGM) recently saying its UAE hotel won’t feature a casino. However, Wynn is confident that gaming will be permitted there.

Should that happen, Wynn Al Marjan Island would be home to the first regulated gaming floor in the Arab world, and will likely hold a quasi-monopoly for several years because of its head start. That’s enviable positioning in a wealthy, tourist-heavy region.

Greff said the UAE project could represent as much as $10 of upside to Wynn’s stock price. Wynn’s pipeline also consists of an effort to land a New York gaming license. But it could be months before more clarity on that emerges.

Wynn Cash Flow Outlook Sturdy

Wynn expects to generate $238 million in cash flow from its Las Vegas Strip venues in the current quarter — a forecast Greff views as attainable.

“Las Vegas remains super strong at the high end, which is WYNN’s sweet spot,” he noted.

Greff added that Wynn Macau’s first-quarter cash flow could be $313 million, as estimated by the operator. That’s ahead of the $304 million Wall Street forecast. But the JPMorgan analyst said neither estimate is overly aggressive.

Increased cash flow could support Wynn’s efforts to return capital to shareholders, including via buybacks and potentially, higher dividends.