Wynn Stock Has Double Potential, Says Analyst

Posted on: September 15, 2022, 04:30h. 

Last updated on: September 15, 2022, 05:00h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts (NASDAQ:WYNN) was Thursday’s best-performing casino stock, surging 7.48% on volume that was more than double the daily average. That’s after an analyst said the shares can nearly double.

Wynn stock
Wynn and Encore Las Vegas. An analyst says Wynn stock can nearly double. (Image: Forbes)

In a note to clients today, Credit Suisse analyst Benjamin Chaiken restarted coverage of the Encore operator with an “outperform” rating and a price target of $117. That’s nearly double where the stock closed on Wednesday, Sept. 14. Wynn finished at $65.23 today — its first close above $65 in about a month.

At current levels, we think Wynn is one of the more compelling stories in gaming,” wrote the analyst.

Chaiken outlines three scenarios for the casino stock. The first is a potential decline to $55, where it could find support there. The next is the more baseline-equivalent, calling for the aforementioned run to $117. Then there is “blue sky scenario,” under which Wynn stock could run to $167, or roughly 2.5x above its closing print today.

Not Fixated on Macau

When it comes to evaluating Wynn stock, Macau must factor into the equation. The company is the parent of Wynn Macau, which controls two integrated resorts in the Chinese territory.

In a standard operating environment, the special administrative region (SAR) drives roughly two-thirds of Wynn revenue and earnings before interest, taxes, depreciation and amortization (EBITDA). That makes the company one of the most China-sensitive non-technology corporations in the US.

However, nothing is standard about the Macau landscape amid ongoing coronavirus travel restrictions. Those rules are sapping gross gaming revenue (GGR) for all six concessionaires, including Wynn. Credit Suisse’s Chaiken advises investors to not fixate too much on when Macau rebounds.

“To be clear, we are not fixated on an exact Macau recovery time line,” he said. “As mentioned previously, we think the risk/reward is compelling at current levels. So while the Macau recovery trajectory is admittedly unclear, we don’t think investors are paying for it in the stock.”

Macau Recovery Could Propel Wynn Stock

Perhaps owing to the fits-and-starts nature of the Macau’s COVID-19 recovery — one that hasn’t come close to legitimately materializing — some investors may be discarding that as part of the Wynn equity thesis. Chaiken says at current levels, market participants aren’t paying for that catalyst.

“While the Macau recovery time line is opaque, we don’t think you are paying for that optionality,” noted the analyst.

Beyond Macau, Wynn’s other-land based casinos are its eponymous venue and Encore on the Las Vegas Strip and Encore Boston Harbor. Sin City traffic and occupancy rates are sturdy, while the operator’s Boston property is breaking records.

Those factors are arguably overlooked by investors, owing to Wynn’s long-running Macau dependency. Additionally, current share prices may not reflect any value attributable to the company’s sports wagering business, according to Chaiken. While WynnBet may not be worth as much as market observers previously speculated, it does have some value.