Wells Fargo on Thursday raised its earnings estimates for Club holding Wynn Resorts ‘ (WYNN) operations in Macao, China, while increasing its price target on the casino operator. The move, driven by signs competitor Las Vegas Sands (LVS) is seeing a recovery at the world’s biggest gambling hub, is further evidence Wynn is poised for a strong comeback as China reopens its economy. Wynn’s earnings before interest, taxes, depreciation and amortization (EBITDA) from its Macao casinos should come in at $655 million for 2023, up from a prior estimate of $425 million, analysts at Wells Fargo wrote in a research note. By contrast, the analysts estimated Wynn would see a loss of $50 million in Macao for the fourth quarter, as China’s Covid-19 restrictions continued to hamper tourism through the end of last year. Wells Fargo increased its price target on Wynn to $125 per-share from $101 and reiterated an overweight, or buy, rating on the stock. The revised estimates were driven by positive comments from Las Vegas Sands CEO Rob Goldstein Wednesday on the state of that casino and resort company’s business in Macao. “It’s just the right customers showing up. This is historically how it’s worked out in recoveries where those who are the most aggressive gamers and retail spenders show up first. And we’re seeing that strongly in Macao. It’s a very good audience, a very strong audience,” Goldstein said on an earnings conference call for LVS’ fourth quarter results. Both Wynn and LVS have been weighed down by Beijing’s zero-Covid policy over the past three years, but are set for a rebound in 2023 as China lifts travel and other Covid-related rules . Las Vegas Sands relies on Macao for about 68% of total revenue, while the gambling center accounts for roughly 40% of Wynn’s total revenue. Before the pandemic, Wynn, which operates two properties in Macao, earned around 70% of total revenue in the special Chinese administrative region. Wynn also operates casinos in Boston and Las Vegas. Shares of Wynn have rallied 75% from a mid-October low of $56.35 apiece, with the stock closing out Thursday up 4.32%, at $102.85 a share. “Looking ahead, LVS management envisions a premium mass led recovery, which should support rapid recovery at Wynn,” the Wells Fargo analysts wrote. “By the time Wynn reports in the coming weeks, we expect similar, if not even more positive [key performance indicators] on Macau’s recovery path,” they added. The Club take We agree with Wells Fargo that the recovery of China’s gambling market is a major catalyst for Wynn Resorts, a core pillar of our investment thesis. Moreover, upbeat commentary from Las Vegas Sands’ CEO represents a positive read-through into Wynn’s operations in Macao. China abandoning its zero-Covid policy represents a receding headwind and a key driver of the casino operator’s recent outperformance. Moving forward, we expect Wynn’s high-end gaming customers to come back and spend their pent-up savings. We continue to believe that Wynn is one of the best plays to capture the upside of China’s economic reopening — and the stock should go higher as recovery in the region takes hold. (Jim Cramer’s Charitable Trust is long WYNN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
People pose for photographs in front of the Wynn Macau casino resort in Macau, China, on Tuesday, July 24, 2018.
Paul Yeung | Bloomberg | Getty Images
Wells Fargo on Thursday raised its earnings estimates for Club holding Wynn Resorts‘ (WYNN) operations in Macao, China, while increasing its price target on the casino operator. The move, driven by signs competitor Las Vegas Sands (LVS) is seeing a recovery at the world’s biggest gambling hub, is further evidence Wynn is poised for a strong comeback as China reopens its economy.
