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Here's Why You Should Hold on to Wynn Resorts Stock for Now

Zacks Equity Research

Wynn Resorts, Limited WYNN is likely to benefit from initiatives, expansion in domestic markets and sales-building concepts to boost non-gaming revenues in Macau. However, dismal traffic due to the coronavirus pandemic pose concerns. Let’s delve deeper.

Factors Likely to Drive Growth

Wynn Resorts generates a solid share of revenues from Macau resorts. Apart from the gaming business in Macau, it has been increasingly focusing on driving non-gaming revenues. 

Notably, the company has been offering various promotional allowances and undertaking initiatives to attract gambling patrons. Also, it is undertaking several initiatives and building newer concepts to boost non-gaming revenues in Macau. Moreover, the opening of the world's longest sea-crossing bridge and tunnel in the prior year, which connects Macau to Hong Kong as well as mainland China's Pearl River Delta, is likely to be beneficial to casino operators.

Meanwhile, the government of China is considering measures to support Macau’s economy and introduce favorable policies, which are expected to improve visitation patterns and boost tourism and traffic in the region. These include approval of Macau’s maritime expansion plans, which are expected to aid shipping and tourism. Also, the government has enabled mainland Chinese cities to offer multi-entry permits.

Given its strong brand name, Wynn Resorts is better positioned to command a premium rate relative to its peers in the gaming and lodging industry. The company recently opened Encore Boston Harbor in Massachusetts. 

Concerns

Wynn Resorts’ financials in 2020 are likely to be adversely impacted by the outbreak of coronavirus. The company’s domestic operations were temporarily closed to contain the spread of the virus. Since the severity and duration of the outbreak and its impact on the business cannot be estimated at present, the company has suspended its dividend program to maintain sufficient liquidity in case of a possible recession.

Moreover, Wynn Resorts’ board of directors and top executives have decided to forgo 33-100% of their salaries in the light of the coronavirus-induced economic downturn. Matt Maddox, the CEO, has agreed to give up 100% of his salary in exchange for shares for the rest of 2020.

So far this year, shares of Wynn Resorts have plummeted 43.6% compared with the industry’s 31.2% decline.

Wynn Resorts, which shares space with Boyd Gaming Corporation BYD, Eldorado Resorts, Inc. ERI and Las Vegas Sands Corp. LVS in the Zacks Gaming industry, carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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