Wynn Resorts Has Multiple Upside Catalysts, Says Analyst

Posted on: March 29, 2023, 07:35h. 

Last updated on: March 29, 2023, 07:35h.

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

Shares of Wynn Resorts (NASDAQ: WYNN) are higher by 32.23% year-to-date, good for one of the best performances among gaming equities. A sell-side analyst believes the operator can generate more upside.

Macau Profitability
The Wynn Macau integrated resort. An analyst sees plenty of drivers of upside for Wynn stock. (Image: Getty Images)

In a new report to clients, Deutsche Bank analyst Carlo Santarelli reiterated a “buy” rating on the gaming stock while boosting his price target on the name to $134 from $128. That implies upside of almost 23% from today’s close at $109.05.

Following a scintillating start to 2023, Wynn shares are higher by just 0.63% over the past month, indicating lethargy and pensiveness on behalf of market participants. Santarelli sees things differently.

Investors are potentially taking the view that too much has been priced in too soon, hence the recent malaise in the shares. While this could surely prove accurate, given the risk of a U.S. recession and the uncertainty of the shape and ultimate destination of the ramp in Macau, we believe WYNN shares are already pricing in some fundamental disruptions,” wrote the analyst.

Santarelli’s $134 price objective on Wynn is well above the Wall Street consensus of $119.40 and he’s one of eight analysts with a “strong buy” or “buy” rating on the stock.

‘Meaningful Upside’ Left, UAE Could Contribute

While Wynn is on a torrid pace to start 2023, Santarelli believes there’s still “meaningful upside” left in the name and that there are multiple drivers of that potential appreciation.

Those include the operator’s casino resort project on Al-Marjan Island in the United Arab Emirates (UAE), on which ground was broken last week. Perhaps owing to the fact that the Arab world has no regulated gaming properties — the Wynn venue will be the first — investors aren’t adequately appreciating the potential benefits Wynn will garner from the UAE venture.

Santarelli concurred, noting it’s something that “we do not believe to be reflected in the shares at present.” By his estimates, the UAE project could be a significant driver of positives for Wynn stock.

“We believe this project could be worth $10-$14 per share in present equity value, with little, if any, value currently embedded in shares,” added the analyst.

Macau Benefits for Wynn

With the UAE venue slated to open in 2027, it’s understandable that Wynn investors may not be placing too emphasis on how that property will affect the share price. In terms of what’s in currently in Wynn’s portfolio, its pair of Macau integrated resorts are contributing mightily to the stock’s 2023 upside.

Analysts expect the operator to post 2023 revenue that’s 66% of what was seen in 2019, prior to the coronavirus pandemic, and earnings before interest, taxes, depreciation, and amortization (EBITDA) that’s 73% of 2019 levels, but there’s potential for those percentages to beat forecasts because Wynn is grabbing market share from Macau rivals.

“In a gaming sector in which the risk of negative revisions for the domestic casino operators remains an overhang, we believe equity exposure to the growth and favorable revision potential of Macau remains prudent,” concluded Santarelli.