Has Wynn Stock Further Upside At $85?

by Trefis Team
Wynn Resorts
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Wynn Resorts (NASDAQ: WYNN) stock has lost more than 35% of its value since early February after the WHO declared the coronavirus outbreak a global health emergency. The company shuttered its Las Vegas and Boston properties just weeks after the partial opening of its two resorts in Macau. While the share price has recovered from the lows of $58 in March, Trefis believes that it can potentially gain 20% once the travel restrictions placed by the Chinese government are lifted in Macau. Our conclusion is based on our detailed comparison of Wynn Resorts’ stock performance during the current crisis with that during the 2008 recession in an interactive dashboard analysis.

Wynn Resorts stock fell because all public places were shut to contain the spread of the virus in Macau and Las Vegas

  • Wynn Resorts generates 70% of its total revenues and 85% of its casino revenues from Macau.
  • After the two-week shut-down, total visitors in Macau fell from 2.8 million in January to just 0.15 million in February. Notably, tourist visitations have not picked up due to the health and safety measures placed by the Chinese government.
  • Moreover, the growing number of coronavirus cases in the U.S. prompted the CDC to issue a domestic travel advisory in March.
  • Following this, the travel and hospitality demand fell considerably in the U.S. and China.
  • While the timing of economic recovery hinges on the broader containment of the coronavirus spread, Wynn Resorts has a strong cash position and no significant debt maturities until 2022.
  • Over the coming months, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to buoy market expectations.

Wynn Resorts fared far worse during the 2008 crisis, but the company’s strong presence in Macau may support a quicker recovery this time

  • WYNN stock declined from levels of around $97 in October 2007 (the pre-crisis peak) to roughly $13 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 87% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%.
  • However, WYNN stock recovered post the 2008 crisis to about $38 in early 2010 – rising by 195% within a year’s timeframe. In comparison, the S&P bounced back by about 48% over the same period.
  • A large portion of the gains were due to the over subscription of Wynn Macau’s initial public offering at the Hong Kong stock exchange.
  • Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak’s impact on a diverse set of Wynn Resorts’ multinational peers including MGM Resorts and Las Vegas Sands. The complete set of coronavirus impact and timing analyses is available here.

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