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Wynn Downgraded to Hold at Jefferies on Macau Concern

Jefferies sees a “more protracted rebound in Macau" and downgraded casino operator Wynn Resorts.

Wynn Resorts  (WYNN) - Get Wynn Resorts, Limited (WYNN) Report was downgraded by Jefferies analyst David Katz to hold from buy amid his concern about Wynn’s business in Macau. 

He slashed his share-price target to $81 from $111.

Macau accounted for 76% of Wynn’s earnings before interest, taxes, depreciation and amortization in 2019, according to Morningstar analyst Dan Wasiolek

Katz now sees a “more protracted rebound in Macau,” he wrote in a commentary cited by Bloomberg. 

“In Macau, the results are evident, while the reasons for it and its likely duration are less clear,” Katz said. Macau’s gross gaming revenue sank 93% in the third quarter, according to Macau’s Gaming Inspection and Coordination Bureau.

“Continued [Individual Visa Scheme] complexity, which is limiting access, and the junket liquidity pressures” present continuing problems, he said.

Katz lowered his earnings estimates to reflect “a more gradual recovery trajectory through 2022.” 

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The company will likely garner gross gaming revenue of $1.8 billion in the fourth quarter, compared to his previous forecast of $7 billion.

Leverage also is a problem and will “limit growth and returns vs. peers” for Wynn, Katz said.

In August Morningstar’s Wasiolek offered some positive commentary regarding Wynn. 

“While covid-19 presents near-term risk to industry demand and financial health, we view Wynn Resorts as a high-end iconic brand that is well positioned to participate in the attractive long-term growth opportunity of Macau.

“We see solid long-term visitation and gaming growth for the gaming enclave, aided over the next several years [by] key infrastructure projects.”

Wasiolek put the stock’s fair value at $110.

Wynn recently traded at $71.42, down 1.8%. The stock has slumped 48% year to date.