Is Wynn Resorts Stock Fairly Valued?

[Updated 06/17/2021]

Despite Wynn Resorts’ (NASDAQ: WYNN) high exposure to Macau, its shares have recovered to pre-Covid levels assisted by the company’s entry into the U.S. sports betting and iGaming industry. In 2019, Macau contributed 70% of the total revenues and 75% of earnings. With the re-implementation of restriction measures in Guangdong, the Macau casino business is likely to face near-term headwinds from low tourist numbers. However, casino expenses, which largely include gaming taxes, account for around 50% of total expenses. Thus, the company reported just $1 billion of operating cash outflow despite a 68% revenue contraction last year. Given the company’s variable operating expense heads, Trefis believes that the stock is fairly valued despite a slump in Macau. We highlight the key factors driving Wynn Resorts Valuation including revenues, earnings, and stock prices in an interactive dashboard.

Financial and operating performance in the recent quarter

In Q1, Wynn Resorts’ revenues observed a 6% sequential improvement assisted by broad-based growth across geographies. The company’s Macau, Las Vegas, and Boston operations continued to post weak numbers as re-opening efforts did not spur a quick demand rebound. Thus, loss from operations widened to $175 million, adding to last year’s $1 billion of operating cash outflow. Room occupancy rate improved in Macau as the easing of travel restrictions improved tourist numbers. The total casino drop in Macau, Las Vegas, and Boston changed by 27%, -22%, and -15% over the prior year, respectively.

[Updated 05/04/2021] – Benefits Outweigh Risks If Holding Wynn Stock

The shares of Wynn Resorts (NASDAQ: WYNN) currently trade at pre-Covid levels as opposed to strong gains observed in MGM Resorts and Penn National Gaming earlier this year. Wynn Resorts has also been expanding its presence in the sports betting and iGaming industry with its WynnBET application. While the company’s sizable Macau exposure has been weighing on its finances, the sports betting business unveils a market opportunity comparable to Macau (In 2019, Macau’s reported $36 billion of gross gaming revenue while the U.S. sports betting market is projected to reach $40 billion at maturity). Therefore, we believe that the benefits of competing in the sports betting business outweigh the risk of a prolonged slump in Macau. Moreover, the company’s sports betting application is available in six states including the prominent hub of New Jersey. We compare the recent stock performance of Wynn Resorts with peers in an interactive dashboard analysis, WYNN Stock Has 53% Chance Of A Rise Over The Next Month After Rising 3.0% In The Last 5 Days.

Wynn’s revenues can increase by $2 billion at a 5% sports betting and iGaming market share

In 2019, Wynn Resorts reported $6.6 billion of total revenues with a 70% contribution from Macau. The company inaugurated its Boston property in mid-2019, diversifying its portfolio due to growing regional demand in the U.S. With the pandemic kindling demand for online services, the company launched its sports betting and iGaming application WynnBET in late 2020. With popular applications including BetMGM, Draft Kings, Barstool, and FanDuel targeting a 15-20% share of the U.S. sports betting and iGaming industry, WynnBET faces stiff competition from industry peers. However, even a 5% share of the sports betting market will grow Wynn’s top-line by $2 billion – potentially leading to stock price appreciation and a higher dividend payout.

Is Wynn stock a better pick over Draft Kings, Penn National, and MGM Resorts?

Wynn stock has gained 3%, 0.7%, and 2.1% over the past 5-day, 10-day, and 21-day period, respectively. This opposed to an ongoing decline in the shares of Penn National Gaming and Draft Kings – highlighting a correction in popular sports betting stocks. Considering Wynn Resorts’ diversification strategy and the ongoing momentum in its stock, we believe that it’s a good pick to realize sizable gains.

With Wynn Resorts currently a better pick compared to MGM Resorts, check out Wynn Resorts Stock Comparison With Peers to see how Wynn compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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