Key Points In Favor Of Wynn Stock

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WYNN: Wynn Resorts logo
WYNN
Wynn Resorts

The shares of Wynn Resorts (NASDAQ: WYNN) have incurred a sharp decline as broader markets observed a sell-off from rising benchmark oil prices, inflation, and resurgence of coronavirus cases in China. Per reports, the WHO has been actively exploring modalities to announce an end to the pandemic as infections in many countries are at record low levels. Also, the uncertainty surrounding the extension of casino licenses in Macau was abated with a temporary extension. Notably, Wynn’s 50% of long-term debt is linked to the construction, renovation, and other financing activities in Macau. Despite the steep fall in Wynn Resorts revenues in the past two years, the company incurred $1.2 billion of operating cash burn – significantly lower than the $6 billion contraction in the stock’s market capitalization.

How did Wynn Resorts perform during the pandemic?

In 2021, Wynn Resorts reported an 80% (y-o-y) growth in total revenues largely assisted by its Las Vegas and Boston operations. Before the pandemic, the company’s Macau, Las Vegas, and Boston operations contributed 70%, 25%, and 5% of total revenues, respectively – with a similar share of total profits. Interestingly, the company’s Vegas and Boston operations assisted the bottom line as net loss stood at $1 billion in 2021 – slightly higher than $715 million of depreciation & amortization costs. Thus, operating cash burn came in at $222 million in 2021 despite total revenues being 40% below pre-pandemic levels. This can be largely attributed to gaming taxes (included in casino expenses) which increase/decrease in proportion to operating revenues. Therefore, the company’s adjusted property EBITDA declined from 27% in 2019 to just 15% in 2021, even as the Macau operations were down by 70% over the same period.

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With Wynn Stock Lagging Broader Markets, Is It Time To Take Positions?

Wynn stock declined from levels of around $136 in February 2020 (pre-crisis peak) to levels of around $57 in March 2020 (as the markets bottomed out), implying Wynn stock lost 58% from its approximate pre-crisis peak. It observed a strong rally post the broader market sell-off and reached $135 in March 2021. Given macroeconomic risks associated with rising infections in China and the Russia-Ukraine war, the stock has dropped to just under $80 at present. In comparison, the S&P 500 Index first fell 34% as lockdowns were imposed in many countries and currently almost doubled in value. (related: Is Penn Stock A Safe Haven Amid Geopolitical Tensions?)

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 WYNN Return -13% -12% -13%
 S&P 500 Return 0% -9% 95%
 Trefis MS Portfolio Return -1% -11% 249%

[1] Month-to-date and year-to-date as of 3/17/2022
[2] Cumulative total returns since the end of 2016

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