Citing “better than previously modeled Macau” gross gambling revenues, J.P. Morgan analyst Joseph Greff raised his 2023 and 2024 cash-flow estimates for Wynn Resorts. Greff also boosted his price target for Wynn stock to $141 per share, up from $131, “with the entire $10 bump related to our positive Macau estimate revisions.” The stock traded at $109 at the time of the report, released this morning.
Greff predicts first-quarter Macanese net revenues of $567 million and cash flow of $148 million, “based on mass table and slots GGR resembling 60% of 2019 levels (quarter likely ended up on a stronger note and improved each successive month in the 1Q23).” Although VIP play is only 20 percent of what it was prior to the pandemic, strength in hotel and retail appears to be allaying concerns over that segment.
Greff’s forecasts for the in-progress second quarter level off slightly, to net revenue of $602 million and EBITDA of $163 million, as mass-market table play and slot action improve to 65 percent of pre-COVID volumes. For the full year, he anticipates Wynn Macau and Wynn Palace netting $2.5 billion, with cash flow of $752 million.
Next year looks even riper, with projected net revenue of $3.4 billion and EBITDA of $1.2 billion, as mass-market play and slots reach near-2019 parity of 95 percent. “We’d like to think our new estimates are reasonably based and not a best-case scenario, so we think there is upward revision potential to these above-consensus forecasts,” Greff wrote.
His prognostications for Wynn Las Vegas remained unchanged. However, Greff made a slight tweak to his Encore Boston Harbor numbers, bumping first-quarter cash flow up to $58 million from $55 million. Better-than-expected slot play and table-game trends accounted for the incremental improvement.
Returning to Macau by way of summation, Greff penned that he was surprised the shares weren’t trading higher, particularly given the gross-gaming numbers reported last week. He attributed this to “an overall de-risking market” and pointed out that “the Macau recovery is in its early innings. We believe the present recovery in Macau is being driven by wealthy mainlanders, which is driving higher growth in the premium mass and direct VIP segments, segments in which WYNN has a significant presence and likely allows it, in the near term, to show continued market share gains, relative to 2019.”