Wynn Earnings Preview: Macau Rebound Should Boost Revenues

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Wynn Resorts

Wynn Resorts (NASDAQ: WYNN) is scheduled to report its Q1 earnings on April 25, and we expect its revenues to grow by more than 25% for the quarter. A significant portion of this growth is expected to come from Wynn’s new casino in the Cotai Strip, Wynn Palace, which opened in the third quarter of 2016. This is likely to have a greater impact on earnings this quarter due to strength in the Macau gaming industry over the last few months. Despite stiff competition from Las Vegas Sands (NYSE: LVS) and other local casinos,  we believe that Wynn will be able to grow its revenues in the region due to its aggressive campaigning in the last few months. Wynn’s hotel and entertainment revenues are also expected to increase this quarter due to the rebound in Macau’s VIP gaming in the past few months. Wynn has diversified its revenue streams in recent years by attracting more mass gamblers and adding non gambling revenue streams. These are likely to result in solid growth for Wynn this quarter.

Las Vegas Market Remains Flat, Macau Emerging Strongly

In February and March 2017, Macau’s gross gaming revenue (GGR) growth touched nearly 20% according to data released by the Macau gaming authority. March marked the 8th straight month of growth in the region’s GGR, indicating a strong rebound in the market. About 65% of Wynn’s overall revenues came from its Macau operations in 2016, and this dependence on Macau markets is likely to help Wynn grow its revenues and profits this quarter. A full quarter’s operating results for Wynn Palace in Q4’16 resulted in about a 37% increase in Wynn’s overall revenues and we expect the momentum to continue this quarter as well. We expect Wynn’s aggressive digital campaigning for Wynn Palace and strength in Macau’s gaming industry to drive its growth this quarter. On the other hand, the Las Vegas market has fluctuated in the past few months, but overall revenue growth in the region has remained positive for casinos. Wynn Las Vegas also remained flat in 2016, and we do not expect much of a change from this trend in Q1’17.

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Diversified Revenue Streams Add Stability To Wynn Growth

Wynn’s revenue from non-gambling sources are likely to go up due to the increased number of visitors in Macau in the first quarter of 2017. The return of VIP gambling in the region should also ensure higher occupancy rate for Wynn’s hotel rooms.

For our model and valuation, please refer to our complete analysis of Wynn Resorts

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