Company Reports

Wynn's focus on a premium offering continues to resonate with consumers. In Macao, the company is building a new tower with 432 suites that will increase its room count at the Palace resort by 25%. We expect the development to produce a high-teens ROIC and support its high-end iconic brand position and midteens percentage gross gaming revenue share in 2025. Long term, we see solid visitation and gaming growth for Macao, aided over the next several years as key infrastructure projects to alleviate the region's congested traffic (Pac On Terminal and Hong Kong Bridge opened in 2018, the light-rail transit in 2019, reclaimed land, and development of Hengqin island) continue to come online, which should expand constrained carrying capacity, thereby driving higher visitation and spending levels. The Chinese government has renewed Wynn's Macao gaming license (the source of the company's regulatory intangible advantage) for 10 years, which along with plans to develop further stands to benefit the company with regard to the region's growth opportunity. Still, the Macao market is highly regulated, and as a result, the pace and timing of growth are at the discretion of the government. We expect upcoming developments that add attractions and improve Macao's accessibility will improve the destination's brand, supporting our constructive long-term view on Macao.

Wynn posted second-quarter revenue growth of 7% to $1.86 billion, driven by a 14% rise in Macao and a 1% lift in Las Vegas. Total adjusted EBITDAR margin contracted 120 basis points to 30.6%, primarily reflecting planned investments in Las Vegas tied to gaming and restaurant openings last quarter.

Wynn's focus on a premium offering continues to resonate with consumers. In Macao, the company is building a new tower with 432 suites that will increase its room count at the Palace resort by 25%. We expect the development to produce a high-teens ROIC and support its high-end iconic brand position and midteens percentage gross gaming revenue share in 2025. Long term, we see solid visitation and gaming growth for Macao, aided over the next several years as key infrastructure projects to alleviate the region's congested traffic (Pac On Terminal and Hong Kong Bridge opened in 2018, the light-rail transit in 2019, reclaimed land, and development of Hengqin island) continue to come online, which should expand constrained carrying capacity, thereby driving higher visitation and spending levels. Our forecast for annual mid-single-digit visitation growth over the next decade is supported by China outbound travel that we expect will average high-single-digit annual growth over the next 10 years. The Chinese government has renewed Wynn's Macao gaming license (the source of the company's regulatory intangible advantage) for 10 years, which along with plans to develop further stands to benefit the company with regard to the region's growth opportunity. Still, the Macao market is highly regulated, and as a result, the pace and timing of growth are at the discretion of the government. We expect upcoming developments that add attractions and improve Macao's accessibility will improve the destination's brand, supporting our constructive long-term view on Macao.

Wynn Resorts' first-quarter revenue growth rose 9.2% on 14.2% and 5.9% increases in Macao and Las Vegas, respectively. Total adjusted EBITDAR margin decreased to 30.3% from 31.3% amid labor pressures in Vegas.

Wynn's focus on a premium offering continues to resonate with consumers. In Macao, demand continues to gradually recover, with Wynn's high-end iconic brand positioned to participate, leading to a midteens percentage gross gaming revenue share in 2025. Long term, we see solid visitation and gaming growth for Macao, aided over the next several years as key infrastructure projects to alleviate the region's congested traffic (Pac On Terminal and Hong Kong Bridge opened in 2018, the light-rail transit in 2019, reclaimed land, and development of Hengqin island) continue to come online, which should expand constrained carrying capacity, thereby driving higher visitation and spending levels. Our forecast for annual mid-single-digit visitation growth over the next decade is supported by China outbound travel that we expect will average high-single-digit annual growth over the next 10 years. The Chinese government has renewed Wynn's Macao gaming license (the source of the company's regulatory intangible advantage) for 10 years, which along with plans to develop further stands to benefit the company with regard to the region's growth opportunity. Still, the Macao market is highly regulated, and as a result, the pace and timing of growth are at the discretion of the government. We expect upcoming developments that add attractions and improve Macao's accessibility will improve the destination's brand, supporting our constructive long-term view on Macao.

In the fourth quarter, Wynn posted moderate sales growth of 1.6%, driven by a 4.4% lift in Macao that offset a 1.6% decline in Las Vegas. Las Vegas EBITDA contracted 320 basis points to 35%, weighed down by the timing of large events.

Although policy uncertainty presents a near-term headwind to demand for US Wynn's resorts, the company's focus on a premium offering continues to resonate with consumers. In Macao, demand continues to gradually recover, with Wynn's high-end iconic brand positioned to participate, leading to a midteens percentage gross gaming revenue share in 2025. Long term, we see solid visitation and gaming growth for Macao, aided over the next several years as key infrastructure projects to alleviate the region's congested traffic (Pac On Terminal and Hong Kong Bridge opened in 2018, the light-rail transit in 2019, reclaimed land, and development of Hengqin island) continue to come online, which should expand constrained carrying capacity, thereby driving higher visitation and spending levels. Our forecast for annual mid-single-digit visitation growth over the next decade is supported by China outbound travel that we expect will average high-single-digit annual growth over the next 10 years. The Chinese government has renewed Wynn's Macao gaming license (the source of the company's regulatory intangible advantage) for 10 years, which along with plans to develop further stands to benefit the company with regard to the region's growth opportunity. Still, the Macao market is highly regulated, and as a result, the pace and timing of growth are at the discretion of the government. We expect upcoming developments that add attractions and improve Macao's accessibility will improve the destination's brand, supporting our constructive long-term view on Macao.

Wynn Resorts' third-quarter revenue increased 8%, driven by a 15% lift in Macao, with Las Vegas up 2%. However, Las Vegas had 60 basis points of EBITDA compression on a lower hold rate.

Although policy uncertainty presents a near-term headwind to demand for Wynn's resorts, the company's focus on a premium offering continues to resonate with consumers. In Macao, demand continues to gradually recover, with Wynn's high-end iconic brand positioned to participate, leading to a low-teens percentage gross gaming revenue share in 2024. Long term, we see solid visitation and gaming growth for Macao, aided over the next several years as key infrastructure projects to alleviate the region's congested traffic (Pac On Terminal and Hong Kong Bridge opened in 2018, the light-rail transit in 2019, reclaimed land, and development of Hengqin island) continue to come online, which should expand constrained carrying capacity, thereby driving higher visitation and spending levels. Our forecast for annual mid-single-digit visitation growth over the next decade is supported by China outbound travel that we expect will average high-single-digit annual growth over the next 10 years. The Chinese government has renewed Wynn's Macao gaming license (the source of the company's regulatory intangible advantage) for 10 years, which along with plans to develop further stands to benefit the company with regard to the region's growth opportunity. Still, the Macao market is highly regulated, and as a result, the pace and timing of growth are at the discretion of the government. We expect upcoming developments that add attractions and improve Macao's accessibility will improve the destination's brand, supporting our constructive long-term view on Macao.

In the second quarter, Wynn's Las Vegas EBITDA expanded 20 basis points to 36.8% on higher revenue per available room and daily rates, as well as controlled operating expense per-day growth of just 1%. Macao had 300 basis points of EBITDA compression, weighed on by lower VIP and mass hold rates.

Covid's headwind on Wynn's Macao operations (50% of 2024 EBITDA) eased greatly in 2023, after China removed restrictions on Jan. 8, 2023. Macao demand continues to gradually recover, even though China's slowing economic growth presents a near-term headwind. That said, we see an attractive long-term growth opportunity in Macao, with Wynn's high-end iconic brand positioned to participate, leading to a low-teen percentage gross gaming revenue share in 2024.

Wynn's first-quarter sales fell 9%, driven by a 13% decrease in Macao, hindered by subdued industry growth. Las Vegas sales fell 2% against tough comparison from hosting last year's Super Bowl. Lower sales and higher labor costs pressured total EBITDA margins to 31.3% from 34.8%.

We have adjusted our cost of equity assumptions for Wynn, Las Vegas Sands, and MGM due to their exposure to Macao, increasing geopolitical tensions between the US and China, and to harmonize with our assumptions for the Hong Kong-listed shares.

Covid's headwind on Wynn's Macao operations (50% of 2024 EBITDA) eased greatly in 2023, after China removed restrictions on Jan. 8, 2023. Macao demand continues to gradually recover, even though China's slowing economic growth presents a near-term headwind. That said, we see an attractive long-term growth opportunity in Macao, with Wynn's high-end iconic brand positioned to participate, leading to a low-teen percentage gross gaming revenue share in 2024.

Wynn Resorts reported solid fourth-quarter 2024 results in its core Las Vegas and Macao markets. We don’t plan to materially change our $113 fair value estimate, leaving shares undervalued. Given the valuation discount, we applaud the firm's decision to accelerate its share repurchase activity during the quarter, having bought back $200 million worth of shares in the period, which amounted to more than half of the $386 million purchased for the full year. We reiterate our Standard Morningstar Capital Allocation Rating.

Covid's headwind on Wynn's Macao operations (51% of estimated 2024 EBITDA) eased greatly in 2023, after China removed restrictions on Jan. 8, 2023. Macao demand continues to gradually recover, even though China's slowing economic growth presents a near-term headwind. That said, we see an attractive long-term growth opportunity in Macao, with Wynn's high-end iconic brand positioned to participate, leading to an estimated low-teen percentage gross gaming revenue share in 2024.

We plan to reduce our $117 per share fair value estimate for narrow-moat Wynn by a low-single-digit percentage, to account for renovations and challenging comparisons in the company’s Las Vegas segment in 2025. We see shares as undervalued.

We maintain our $117 per share fair value estimate for narrow-moat Wynn, after the company presented additional details on its upcoming Al Marjan Island project scheduled to open in the United Arab Emirates in 2027. After appreciating about 30% since China announced stimulus measures on Sept. 23, 2024, shares now trade at just a slight discount to our intrinsic value. Given the volatile nature of the shares, we think investors can wait for a more attractive entry point.

Covid's headwind on Wynn's Macao operations (51% of estimated 2024 EBITDA) eased greatly in 2023, after China removed restrictions on Jan. 8, 2023. But slowing economic growth presents a near-term headwind to demand and the Macao government continues to heavily regulate VIP play, elevating long-term operational risk. That said, we see an attractive long-term growth opportunity in Macao, with Wynn's high-end iconic brand positioned to participate, leading to an estimated low-teen percentage gross gaming revenue share in 2024.

Covid's headwind on Wynn's Macao operations (51% of estimated 2024 EBITDA) eased greatly in 2023, after China removed restrictions on Jan. 8, 2023. But slowing economic growth presents a near-term headwind to demand and the Macao government continues to heavily regulate VIP play, elevating long-term operational risk. Also, Wynn has exposure to the expected long-term shift away from VIP gaming revenue toward nongaming and mass play. That said, we see an attractive long-term growth opportunity in Macao, with Wynn's high-end iconic brand positioned to participate, leading to an estimated low-teen percentage gross gaming revenue share in 2024.