Wynn Resorts stock soared Thursday on news that billionaire Tilman Fertitta increased his stake in the company to 9.9%.
Bloomberg News reports that Fertitta is unhappy with the casino operator’s performance and share price. And
citing unidentified people familiar with Fertitta’s thinking, Bloomberg wrote, “Wynn management isn’t doing an adequate job communicating Wynn’s performance to investors and Fertitta thinks there are opportunities to expand the Wynn brand, particularly in the U.S.”
A 13G/A filing released late Wednesday showed that Fertitta owned a total of 10.9 million shares in a passive stake. In October 2022, Fertitta acquired 6.9 million shares for a 6.1% stake in the company, below the 8.4% owned by Elaine Wynn at the time.
The acquisition of the stock increases speculation of Fertitta’s intent. He’s the owner and CEO of Houston-based Fertitta Entertainment with its Golden Nugget casino brand, restaurants, and the NBA’s Houston Rockets.
CNBC’s David Faber said on the network Thursday that Fertitta is expected to become an activist shareholder in the future. His stake is “likely not going to be passive for long.”
Wynn’s stock opened at $87.40 on Thursday and hit a high in early trading at $95.14.
As of late Thursday morning, Wall Street analysts hadn’t weighed in on the move, but they’ve touted the upside of Wynn stock, given its development of a $5.1 billion resort in the United Arab Emirates.
Wynn announced on Oct. 4 that it received its license for its resort on Al Marjan Island that’s under construction and is expected to be completed in the first quarter of 2027. Wynn will have a 40% equity interest and a management contract.
“The ROI profile should be appealing and is potentially very needle-moving for the equity and we still think not priced in at current levels despite the China stimulus related upward move in the stock in recent weeks,” Joseph Greff with J.P. Morgan said in October. “We think this market, which will likely be license constrained and focused on the high-propensity-to-spend luxury consumer in the region, has the potential to have similar characteristics as the attractive and high ROI Singapore integrated resort market.”
Shaun Kelley, an analyst with Bank of America, noted at the time that half of the $5.1 billion project cost came from land and capitalized interest that wasn’t included in the original budget. On a higher budget, Wynn raised their property EBITDA expectations to $500 million-$800 million versus the prior range of $450 million-$600 million supported by a deeper dive on the addressable market and project scope increases, he said.
“We think the project and total area market underwriting lean on the conservative side, especially factoring in the competitive landscape,” Kelley said. “Property margins of 36% to 43% are attractive, supported by a blended tax rate of 10% to 12%.The budget and regulatory framework is much more refined, which should allow investors to factor in the project as they roll forward models to 2027. Quick math on the revised assumptions yield a potential net present value of $10 to $15 per share and strategic success in the UAE could help push Wynn into the growth conversation of gaming stocks along with Churchill Downs and Red Rock Resorts.”
