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What happened
Week to date, shares of Wynn Resorts (NASDAQ: WYNN) were up 12.7% as of 11:18 a.m. on Friday, according to data provided by S&P Global Market Intelligence. The casino operator got a boost at the end of 2022, as China eased restrictions to Macau, which made up most of Wynn Resorts’ total revenue before the pandemic.
One analyst recently cited key catalysts that could send the stock higher in 2023.
So what
Visitation to Macau, in which Wynn Resorts owns 72% of Wynn Macau (OTC: WYNM.Y), evaporated during the pandemic. Revenue from the company’s Macau operations made up nearly 70% of total revenue in 2019. Over the last three years, Wynn’s revenue and operating income have fallen significantly, which has sent the stock down 33%.
Wells Fargo analyst Daniel Politzer upgraded the stock to overweight and raised his near-term price target to $101. He sees China’s recent easing of COVID restrictions in Macau as a catalyst for a turnaround in Wynn’s financial results. Politzer believes Wynn’s smaller size combined with its premium offering to tourists will allow it to recover quickly.
Now what
Wynn Resorts could be a very rewarding stock to hold over the next few years. A recovery in Macau would no doubt lift the stock, which trades at a cheap valuation compared to the company’s pre-pandemic profitability.
The company reported an operating loss of over $200 million on a trailing-12-month basis through the third quarter. However, with a market cap of $10.6 billion, Wynn Resorts’ valuation is less than 10 times its peak operating profit within the last five years. It might be time to take a closer look at top casino stocks, especially those that have the most to gain from a recovery in tourism in Macau.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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