Wynn Resorts, Limited WYNN will likely benefit from solid Macau performance, non-gaming businesses and development projects. Also, focus on strategic expansion plans bodes well. However, increased operating expenses are a concern.
Let us discuss the factors that highlight why investors should retain the stock.
Factors Likely to Drive Growth
Wynn Resorts has been benefitting from solid Macau performance. Following the elimination of COVID-19 protective measures by Macau authorities in January 2023, visitation to Macau and the company’s operations improved, leading to increased business volumes in first-quarter 2024. During the first quarter, Wynn Palace reported operating revenues of $586.9 million, up $217.5 million from $369.4 million in the same period in 2023. WYNN’s operating revenues came in at $411.7 million, rising by $181.0 million from $230.7 million in the first quarter of 2023. Higher gaming volumes, increased hotel occupancy and restaurant covers backed the upside.
The company stated that the positive momentum continued into the second quarter, with a 30% increase in mass drop per day in April (compared to April 2019) and a 99% hotel occupancy rate. The company reported a 30% rise in mass drop per day (compared with the same period in 2019) during May’s Golden Week.
Increased focus on non-gaming avenues bode well. In the first quarter, the company reported robust performance across non-gaming businesses with 16% year-on-year revenue growth, driven by a 21% increase in hotel revenues and strong casino volumes. The upside can be attributed to exceptional service levels, continuous property reinvestment and the unique Only at Wynn programming. The company registered positive momentum into April with increases in Drop, Handle and RevPAR (revenue per available room) on a year-on-year basis.
In Macau’s development realm, the company has started initial demolition and construction on its second concession project, the Destination Food Hall. It has also advanced in the design and planning stages for other major concession-related capital expenditure commitments, including a new event and entertainment center with a unique theater and show. These projects require various government approvals, leading to a wide range of potential CapEx outcomes in the near term. The company expects CapEx for these commitments to range between $350 million and $500 million from 2024 through 2025-end. The company believes that the proposed investments and projects will drive growth in the coming periods.
The emphasis on the expansion of new markets bodes well. The company is considering greenfield development opportunities in New York City and potentially Thailand. In New York, a full-scale Wynn integrated resort at Hudson Yards is anticipated to generate significant tax revenue, tourism and employment. Despite delays in the RFA submission process, the company maintains interest in securing a location in Manhattan. In Thailand, the company is closely monitoring regulatory and licensing developments.
Concerns
Image Source: Zacks Investment Research
In the past year, shares of Wynn Resorts have declined 10.8% compared with the industry’s 2.8% fall. A challenging macro environment mainly caused the downside.
Increased operating expenses are a concern for the company. During the first quarter of 2024, the company’s total operating expenses came in at $1.5 billion compared with $1.25 billion reported in the prior-year period. The upside was primarily due to a rise in casino, room, food and beverage, retail and other and general and administrative expenses. Moving ahead, the company is cautious of inflation and interest rate fluctuations.
Zacks Rank & Key Picks
Wynn Resorts currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are:
Strategic Education, Inc. STRA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
STRA has a trailing four-quarter earnings surprise of 36.2%, on average. The stock has surged 50.3% in the past year. The Zacks Consensus Estimate for STRA’s 2024 sales and earnings per share (EPS) indicates an increase of 6.4% and 33.3%, respectively, from the year-ago levels.
Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank of 1. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has rallied 76.7% in the past year.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS calls for growth of 16.6% and 61.9%, respectively, from the year-ago levels.
Hasbro, Inc. HAS presently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 17.5%, on average. The stock has gained 17.8% in the year-to-date period.
The Zacks Consensus Estimate for HAS’ 2025 sales and EPS suggests an improvement of 4% and 14.4 %, respectively, from the year-ago levels.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Hasbro, Inc. (HAS) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Strategic Education Inc. (STRA) : Free Stock Analysis Report
Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
