Wynn Downgraded to Hold at Jefferies on Macau Concern

Jefferies sees a “more protracted rebound in Macau" and downgraded casino operator Wynn Resorts.
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Wynn Resorts  (WYNN) - Get 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.” 

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.

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