Deutsche Bank has issued a bullish outlook for Wynn Resorts stock in 2025 with a price target about $30 higher from where it’s trading at year end. The new year could set the stage for future value coming from Texas, New York, and Thailand.
Wynn, which has been trading between $88 and $90, has a price target of $118.
Deutsche Bank analyst Carlo Santarelli expects Wynn to be a modest share donor in Macau in 2025, primarily due to the disciplined approach the operator has taken and likely will continue to take toward promotions. In 2019, Wynn spent $1.4 billion on promotions and customer reinvestment. Over the third quarter and last 12 months, Wynn spent $680 million on the two.
While promotional spend has been lower, so too is gaming revenue, down from 2019 about $1.6 billion over the last 12 months. Promotions have represented 18.6% of gaming revenue, well below the 26% in 2019.
Santarelli said the shift stems primarily from the changing VIP and mass-gaming revenue mix, which would dictate a like-for-like reinvestment rate of 18.3%.
“As such, we believe like-for-like reinvestment levels have gone up a bit relative to 2019, but far less than the like-for-like increases of market peers. The strategy has worked for Wynn, as EBITDA share over the last 12 months has grown relative to 2019, despite gaming revenue share slipping a bit relative to 2019. We believe maintaining this trajectory in 2025, regardless of the promotional environment, will serve as a key for Wynn in Macau and Wynn shares.”
Despite its Al-Marjan Island casino-resort project opening in 2027 in the United Arab Emirates, Santarelli doesn’t expect the operator to garner much credit for its development in 2025, unless Macau fundamentals drive momentum in the stock and investors seek ways to justify higher valuations.
As it stands, the UAE project isn’t included in Deutsche Bank’s $118 price target, though Wynn “will harvest considerable equity value” from the development over time. Wynn will own 40% of the joint venture and spend on the project is widely expected to be $5.1 billion, including $550 million of land expenditures, capitalized interest, and fees, as well as $4.6 billion of construction costs.
The project is being funded with 53% equity and 47% debt, with an assumed 7% cost of debt. The financing was widely expected to be completed by year end, though Santarelli said it could slip into the first quarter.
Wynn has $900 million left to spend toward its $1.08 billion equity contribution to the venture. The annual cash flow to Wynn through both management fees and potential dividend distributions could equate to $180 million to $370 million per year; when capitalized at 10 times and discounted back four years at 10% per annum, that implies a present equity value of $11 to $23 per share, Santarelli said.
In addition to the UAE development, some opportunities for Wynn could arise in 2025 that further expand the outlook for the geographic footprint.
“We believe these other potential pipeline scenarios could serve as a catalyst for shares, with 2025 serving as a pretty meaningful year for unlocking what could be a robust longer-term development story for Wynn,” Santarelli said.
Those opportunities include Thailand, with gambling regulations due by the end of 2025, New York with license applications expected in the second quarter, and
Texas with a potential referendum on the November ballot. “We think Wynn is well positioned in each of these geographies,” Santarelli said.
As for the Las Vegas Strip, Wynn and its Encore property continue to face challenging comparisons in 2025, though the setup is far less daunting than this time last year, given the baccarat hold comparison headwinds in the second half of 2024, Santarelli said.
While the first quarter is sure to be challenging compared the first quarter of 2024 with the Super Bowl, the balance of the year for Wynn appears fairly benign, Santarelli said.
“Given what we project will be softer leisure demand volumes in 2025, as well as rooms out of service for renovation work and still tough comps on the hotel side, we are anticipating revenue per room and hotel room revenue contraction in 2025. This forecast could prove conservative given group room nights on the books for 2025 appear to rival 2024, which in light of the rooms offline, could promote average daily rate growth and benefit the revenue per room.”
The softer demand, as well as the rooms offline, also influence other elements of non-gaming revenue, which Santarelli models lower for 2025. Given broadly benign hold influences in 2024 to date, Deutsche Bank’s gaming revenue forecasts are relatively steady year-over-year, but modestly lower (-1.9%), due to the challenging first-quarter 2025 comparison.
“While our Las Vegas Strip forecast for Wynn is below consensus, both forecasts call for contraction in 2025,” Santarelli said. “Though not our base case, given moderating cost creep, as well as the wealth effect for Wynn’s higher-end customer base in light of continued asset appreciation, the potential to surprise to the upside exists, and would serve as a positive catalyst.”
In 2025, while Macau fundamentals will likely influence shares, Santarelli expects capital returns to also emerge as a theme for investors. Given concerns around the impact of the concession spend on capital returns, he believes the resumption of dividends from Wynn Macau in 2024 was important, though the acceleration of dividends in 2025 and 2026 will be of greater significance for Wynn holders.
In 2024, Wynn Macau dispensed dividends totaling $101 million, of which Wynn received $72 million. While concession spend is expected to accelerate in 2025, given that a modest amount of the $350 million to $425 million concession spend guidance over the 2024 and 2025 period was expended in 2024, Santarelli believes Wynn Macau will ramp dividends, while remaining leverage neutral.
“We also believe dividends can accelerate in 2026 while also reducing financial leverage,” Santarelli said. “We see the increasing capital returns as a favorable driver of the narrative around Wynn shares as the direct cash proceeds further support our view of an inexpensive free cash flow multiple.”
Deutsche Bank’s $118 price target is based on a sum-of-the-parts approach with Wynn Las Vegas, adjusted for the share of the Crown retail, Encore Boston Harbor, and royalty fees associated with Wynn Macau, at a blended multiple of 10 times its 2025 EBITDAR estimate.
They then add the value of Wynn’s Strip west land bank before extracting U.S. net debt and Encore Boston Harbor rental payments capitalized at eight times. They estimate the domestic portfolio is worth about $70 per share.
“On a SOTP basis, we derive a blended multiple of 11.5x our 2025 EBITDA estimate for Wynn Macau, of which 72% is attributable to Wynn.” Santarelli said. “We extract net debt and arrive at an equity value of $66 per share with Wynn’s 72% stake worth $48 per share, which when combined with the domestic operations sum to our $118
price target. Our multiples are based on peer trading levels and asset transactions in the respective markets.”
