In an investor note released today, J.P. Morgan analyst Joseph Greff hailed Wynn Resorts as “one of the more compelling risk-rewards [scenarios] in our coverage universe.”
He wrote that a sub-historical valuation on the stock, which was trading at $103/share, “takes into account China macro and geopolitical risks, a potential incrementally positive shift in investor sentiment with respect to Macau/China invest-ability, and an underappreciated development pipeline.”
Wynn’s projected first-quarter cash flow is $238 million from its Las Vegas casinos, which Greff deemed “not aggressive.” This is despite the absence of a J.P. Morgan investment conference, which was held at Wynn Las Vegas last year, “so there is that minor comparison issue.”
Wynn’s Macanese projections are somewhat more optimistic than Wall Street’s. It foresees eight percent growth in cash flow (to $313 million), while Wall Street expects four percent or $304 million.
Greff penned, “We don’t see either estimate as aggressive, given encouraging 1Q24TD trends.” He went on to observe that tourism to Macau was at 83 percent of pre-pandemic volume, a substantial increase from the last three months of 2023.
Continued Macanese growth was projected, driven by mass-market play. Greff noted that visitation and consumer spending in Macau were disconnected from a “mixed” Chinese macroeconomic picture.
Despite MGM Resorts International’s recent pullback in Dubai, Greff remained optimistic about a would-be casino megaresort for Wynn on Al-Marjan Island. He wrote that it represented an additional unpriced $10/share value for Wynn stock.
“Las Vegas remains super strong at the high end, which is WYNN’s sweet spot,” Greff continued.
The analyst was sufficiently upbeat to raise his price target on Wynn shares from $118/share to $123.
