Better Buy: Wynn Resorts Or Penn National Gaming?

by Trefis Team
+57.14%
Upside
69.67
Market
109
Trefis
WYNN
Wynn Resorts
Rate   |   votes   |   Share

The shares of Penn National Gaming (NASDAQ: PENN) have nearly doubled since the beginning of the year compared to a 36% decline for Wynn Resorts (NASDAQ: WYNN). The recent gains in Penn stock can be largely attributed to the re-opening of the U.S. economy and the company’s diversified presence across different states. However, a prolonged slump in Macau has weighed on Wynn Resorts’ stock as the company generates 70% of total revenues from Macau. Trefis believes that Wynn stock has better upside potential due to a lower current valuation multiple (EV/EBITDA) and strong exposure to the growing Macau Gaming Market. We compare the historical trends in revenues, stock prices, margins, and valuation multiple of Wynn Resorts and Penn National Gaming in the interactive dashboard, Is Wynn Resorts Attractive Compared To Penn National Gaming?

After acquiring Greektown Casino and Margaritaville Resort, Penn National Gaming’s revenues observed a 50% jump in 2019. Interestingly, both casino companies now generate comparable revenues with a similar EBITDA margin and long-term debt obligations. However, we believe that Penn’s sizable presence in the U.S. coupled with the surge in its long-term debt is likely to weigh on the stock in the coming years. Since 2016, Macau Gaming Market and the American Commercial Casino Industry have grown at a CAGR of 9.4% and 3.8%, respectively.

How do the core businesses of Wynn Resorts and Penn National Gaming compare?

Penn National is a gaming and racing property manager with a diversified presence across multiple states in the U.S. In 2019, the company’s North, East, South, West, and other regions contributed 45%, 21%, 12%, 21%, and 1% of the total revenues, respectively. The company generates nearly 90% of gaming revenues from slot machines despite the prominent sports betting and online casino service offerings. Due to a larger focus on gambling activities than other entertainment services, gaming revenues contribute 80% of the company’s top line. On the contrary, Wynn Resorts is an integrated resort operator with a strong presence in Macau (70% of total revenues). Gaming revenues also contribute a bulk of Wynn Resorts’ top line (nearly 69%), but diversified services including hotel stay, musical events, shopping malls, etc., are popular attractions for tourists staying in integrated resorts.

As economies re-open amid the Covid-19 crisis, efforts to prevent recurring outbreaks remain a key concern for countries across the world. Thus, the Chinese government is resuming its Macau tourist visa process in a phased manner with stringent quarantine measures for people returning from international locations. While the slump in Macau is expected to weigh on Wynn Resorts in the near-term, the Macau Gaming Market’s long-term trends are likely to favor the stock as restrictive measures are eased.

 

What if you’re looking for a more balanced portfolio instead? Here’s a top quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk. It has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!