Pent-up demand from the pandemic has led to a boom year for both vacation and business travel as in-person conferencing returns, suggests Mike Cintolo, growth stock specialist and editor of Cabot Top Ten Trader.
This has benefited hotel and casino operators, but for Wynn Resorts (WYNN) — which derives a significant chunk of its revenue from the gambling mecca of Macau — continued Covid-related restrictions in China have remained an obstacle.
Wynn reported revenue of $890 million in Q3 that was 11% lower from a year ago, along with a per-share loss of $1.20. The subpar results were attributed the travel restrictions in Macau, although the company reported “encouraging pockets of demand” during the recent October holiday season in China.
The disappointing top and bottom lines also obscured a new quarterly record for adjusted property EBITDA (up 12%) at the hotelier’s Wynn Las Vegas and Encore Boston Harbor properties, which generated over $1 billion in EBITDA combined thanks to returning domestic travel demand.
The company is also advancing on the late stages of a plan for Wynn Marjan, a multi-billion-dollar integrated luxury resort in the United Arab Emirates, and expects to begin construction on the property (Wynn’s first beach resort) by the middle of next year.
The firm said its liquidity position is “very strong” at nearly $3 billion, and management has been confident enough to repurchase 2.9 million shares so far this year (3% of the float).
Looking ahead, the biggest part of the story is that Wynn expects improvement in its Macau operations in the quarters ahead as Covid restrictions are gradually relaxed (Wynn’s casino license in Macau was just tentatively renewed for another 10 years). Wall Street sees sales dropping 8% in Q4, then exploding higher in the next several quarters as China presumably reopens in 2023.
Technically, WYNN’s post-pandemic rally peaked in March 2021; 15 months later, shares were down by nearly two-thirds. But the stock began a bottoming process at that point, with another test in October. But a blastoff on Halloween — when Tilman Fertitta, a billionaire investor, took a stake in the firm — changed perception, and WYNN has kited higher ever since. Minor weakness should be buyable.
