Wall Street accepted the announced departure of Wynn Resorts CEO Matt Maddox with equanimity, more interested in Wynn’s pivot away from what it considers overzealous spending by its sports-betting competitors.
Maddox will serve until Jan. 31 and current-CFO Craig Billings will take over Feb. 1. Maddox will serve on the Wynn Macau and Wynn Interactive boards. No reason was given, other than Maddox said it was time to move on after 20 years with the company and four years in his current role.
“Wynn surprised tonight, announcing that CEO Matt Maddox would be leaving the company at which he has served since the early days,” said Deutsche Bank analyst Carlo Santarelli. “In short, we believe the departure of Mr. Maddox will come as a surprise to most, though we also believe both the sell-side and institutional-investor community have a knowledge of and a respect for the strategic and business acumen of the incoming CEO, Craig Billings. As such, barring conspiracy theories around the departure of Mr. Maddox, most notably the implications for the Macau (concession-renewal) process, of which we think there are virtually none, we expect a smooth transition.”
Joseph Greff, an analyst at JP Morgan, credited Maddox for achieving many successes during what he called the “tough post Steve-Wynn-era,” which was followed by an even tougher pandemic period.
“While Matt is relatively young, we have to think his tenure at Wynn, especially over the last two years, was taxing and given corporate, Macau, and Las Vegas survival and successes, it’s probably a good time to transition,” Greff said. “Also, we have to think the last four years probably felt like dog years given the downs and ups. So we get it. He will be succeeded by CFO Craig Billings, a succession that is not surprising to us, though the timing … we thought it would happen later.”
David Katz, an analyst with Jefferies Securities, talked about the news of the leadership change in the context of Maddox and Billings being confident in Wynn’s Las Vegas and Boston properties. Wynn’s announcement of a shift toward a more conservative investment in digital was noteworthy.
“Leadership changes could affect the land-based and digital businesses,” Katz said. “Taken in total, we remain at hold (for the stock).”
Santarelli weighed in on Wynn’s dialing back of its igaming strategy, noting that executives are calling the current promotional and customer-acquisition strategies irrational.
“As it pertains to sports betting, we think Wynn is making a sound decision,” Santarelli said. “We expect fourth-quarter losses to exceed the $103 million third-quarter (adjusted earnings loss), and we expect losses to curb from that point forward, as Wynn pulls in on spending.”
Santarelli said that of a few reasons for the pull-back decision, the “most notable is the chasing of unprofitable cohorts by competitors, as well as the high levels of promotional activity.”
Wynn generated $14 million in net revenue in the period from igaming, “despite what we believe was low hold,” Santarelli said. “Management noted the business is currently run-rating $170 million of gross gaming revenue. While we applaud the decision, we are intrigued by what the process of re-engagement looks like. As we have previously said, we believe customer acquisition is one piece of the puzzle, but customer retention is an entirely different and ongoing matter, as is often the case in a commodity business.”
Deutsche Bank said its fourth-quarter and 2022 adjusted earnings estimates for Wynn Resorts are now lower as they trim 2022 Macau forecasts and igaming losses have increased. That is despite increases to Wynn Las Vegas and Encore Boston Harbor forecasts.
“Given our revisions and a lower than previously contemplated valuation for the WynnBet ownership, our price target goes to $131 from $140. We reaffirm our Buy rating,” Santarelli said.
Greff said Las Vegas Strip momentum will continue in 2022, aided by improving group and convention business. They lowered Macau adjusted earnings.
Katz talked about Wynn being prudent in terms of marketing in New York with Wynn Interactive and is instead expecting to leverage its database of affluent residents. Management indicated an interest in a downtown New York license provided a reasonable return profile, he said.
