Wynn Resorts could shine in 2024 as Macau stock price recovers
As Macau's economy continues to recover, Wynn Resorts (NASDAQ: WYNN ) could be the star gaming stock of the year.
That's the view of Stifel analyst Steven Wieczynski, who highlighted his preference for Macau operators in 2024 in a recent note to clients. Wynn's Wynn Macau unit operates two integrated resorts in China, the only region where casino gambling is allowed. Wieczynski reiterated a "buy" rating on the Wynn Palace operator and raised his price target on the stock to $133 from $125. That’s a 40% increase from the closing price on January 5.
As we enter 2024, we remain puzzled as to why Macau-centric stocks continue to trade so poorly," the analyst wrote."We fully understand and appreciate China's macroeconomic concerns, which Concerns continue to plague the investor mindset, but haven't we seen a story like this play out in the U.S. over the past 18 months? By this we mean, "While investors have been nervous about the U.S. macro picture for some time, most of our coverage is still seeing healthy/strong consumer demand." "
Wynn Resorts shares are up about 10% in the past year. But the Hong Kong-listed shares of five of the six Macau franchises, including Wynn Macau, plummeted last year, with current valuations reflecting dire economic conditions that have yet to play out.
Wall Street may be too conservative
While Wynn shares underperformed the overall market last year, it can't be ignored that its domestic venues on the Las Vegas Strip and Encore Boston Harbor posted record sales. Macau has plenty of rides, often accounting for two-thirds or more of Wynn sales.
Factors highlighting Wynn stock's long-term potential include still pent-up demand from Chinese citizens to travel to Macau and Wynn's ability to shift its focus to high-end mass customers, which, combined with the potential for a significant recovery in VIP attendance in the future.
"While we remain above consensus, we believe current consensus forecasts remain overly conservative and introduce some macro slowdown into the market," Wiczynski added. "As pent-up demand in China, improving fundamentals facilities and a tremendous savings rate, we believe our forecasts are more realistic and believe the consensus forecast will ultimately be closer to our forecasts."
Wynn stock is currently trading at three times its long-term average, according to analysts.
Quality public attention could boost Wynn stock
Wynn's ability to pivot away from the highly competitive VIP market and focus more on Macau's premium mass clientele could also pay dividends in another way. If China's economy continues to stagnate, prime mass punters will be more likely to continue visiting casino enclaves than mass market competitors.
That's one reason Stiefel prefers Wynn over rival Las Vegas Sands (NYSE: LVS ). While the latter is Macau's largest operator, it relies more on mass-market players than Wynn.
"(Wynn) shares currently trade at a discount of more than 25% to its normal historical valuation, a discount that we believe reflects significant recovery timing or macroeconomic pressures, which we believe is overstated," Wieczynski concluded."In other words, if we assume a full market recovery (which is not reflected in our revised estimates), our price target could see significant upside."
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Source: www.casino.org
