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Is Wynn Resorts (WYNN) Doomed to Have a Terrible 2019 Too?
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The year 2018 has turned out to be a disappointing one for the Gaming industry and Wynn Resorts, Limited (WYNN - Free Report) is no exception to the trend. Shares of Wynn Resorts, which touched the $200 mark in January 2018, are now hovering around $110.
Year to date, the company’s shares have lost 33.8%, compared with the industry’s decline of 31.7%. The downside can primarily be attributed to disappointing Macau performance as the company generates almost 80% of revenues from the region. Notably, Macau, which is the world’s largest gambling hub, has disappointed investors with lower-than-expected revenues. In fact, other stocks from the same industry for instance Melco Resorts & Entertainment Ltd. (MLCO - Free Report) and Las Vegas Sands Corp. (LVS - Free Report) , which also have a significant exposure in Macau region, have disappointed investors.
Let’s Take a Closer Look
Macau, the world’s largest gambling hub, remains volatile. Slowdown in China and the trade war between Beijing and Washington has impacted the company. Flagging China property price has impacted the high-end VIP segment. Wynn Resorts has the most exposure in high-end VIP segment in Macau. However, mass market revenues continue to impress. Moreover, Macau's Gaming Inspection and Coordination Bureau (“DICJ”) is increasing its audits of the junket industry owing to concerns over money laundering. Markedly, junkets are responsible for about half of gaming revenues in Macau. Consequently, this crackdown is likely to hamper Macau revenues.
Dismal Las Vegas performance has also been weighing on the company’s performance lately. Revenues from Las Vegas operations declined 14.1% year over year to $398.9 million in third-quarter 2018 owing to decline in both casino and non-casino revenues.
Further, Wynn Resorts’ heavy reliance on debt financing remains a concern. At the end of third-quarter 2018, total outstanding debt amounted to $8.93 billion, including $3.10 billion of Wynn Las Vegas related debt, $4.24 billion of Macau debt and $985 million at the parent company and other. Moreover, the company may fail to finance its upcoming projects owing to a higher debt burden. Moreover, any downturn in the macroeconomic and credit market conditions is likely to make it difficult for the company to pay or refinance debts, going ahead.
Can the Stock Stage a Comeback in 2019?
Shares of the company has displayed some resilience of late. In fact, the stock has increased 6.7% month to date, outperforming the industry’s growth of 1.6%. The recent surge can primarily be attributed to better-than-expected Macau gaming revenues as casino operators witnessed signs of recovery in November after months of weakness owing to China’s economic slowdown.
However, the scenario for 2019 is still not encouraging for Wynn Resorts. Per the Zacks Consensus Estimate, the Zacks Rank #5 (Strong Sell) company’s earnings in 2019 are likely to witness a decline of 9.3% year over year, compared with the industry’s collective growth of 8%. Further, revenues in 2019 are expected to gain 3%, compared with the industry’s estimated increase of 6.5%.
Hopes Hinge on Sports Betting Legalization
The legalization of sports betting outside Nevada holds a lot of prospect and it is to be seen how much the company can capitalize on it. Notably, Wynn Resorts, entered into an agreement with BetBull Limited (“BetBull”) — a sports betting operator based in Europe. Wynn Resorts and BetBull’s digital sports betting platform will leverage the developing sports betting market in the United States.
In an effort to strengthen foothold in the gaming industry, Wynn Resorts seems to be banking on sports betting, following the legalization outside Nevada. In May 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act (“PASPA”) that banned sports betting outside Nevada. The court withheld the legitimacy of a 2014 New Jersey law, which allows sports betting at casinos and racetracks in the state. The decision also broke the Nevada's monopoly on the betting market. The Court ruling also opened door for other states to enter sports betting business.
Image: Bigstock
Is Wynn Resorts (WYNN) Doomed to Have a Terrible 2019 Too?
The year 2018 has turned out to be a disappointing one for the Gaming industry and Wynn Resorts, Limited (WYNN - Free Report) is no exception to the trend. Shares of Wynn Resorts, which touched the $200 mark in January 2018, are now hovering around $110.
Year to date, the company’s shares have lost 33.8%, compared with the industry’s decline of 31.7%. The downside can primarily be attributed to disappointing Macau performance as the company generates almost 80% of revenues from the region. Notably, Macau, which is the world’s largest gambling hub, has disappointed investors with lower-than-expected revenues. In fact, other stocks from the same industry for instance Melco Resorts & Entertainment Ltd. (MLCO - Free Report) and Las Vegas Sands Corp. (LVS - Free Report) , which also have a significant exposure in Macau region, have disappointed investors.
Let’s Take a Closer Look
Macau, the world’s largest gambling hub, remains volatile. Slowdown in China and the trade war between Beijing and Washington has impacted the company. Flagging China property price has impacted the high-end VIP segment. Wynn Resorts has the most exposure in high-end VIP segment in Macau. However, mass market revenues continue to impress. Moreover, Macau's Gaming Inspection and Coordination Bureau (“DICJ”) is increasing its audits of the junket industry owing to concerns over money laundering. Markedly, junkets are responsible for about half of gaming revenues in Macau. Consequently, this crackdown is likely to hamper Macau revenues.
Dismal Las Vegas performance has also been weighing on the company’s performance lately. Revenues from Las Vegas operations declined 14.1% year over year to $398.9 million in third-quarter 2018 owing to decline in both casino and non-casino revenues.
Further, Wynn Resorts’ heavy reliance on debt financing remains a concern. At the end of third-quarter 2018, total outstanding debt amounted to $8.93 billion, including $3.10 billion of Wynn Las Vegas related debt, $4.24 billion of Macau debt and $985 million at the parent company and other. Moreover, the company may fail to finance its upcoming projects owing to a higher debt burden. Moreover, any downturn in the macroeconomic and credit market conditions is likely to make it difficult for the company to pay or refinance debts, going ahead.
Can the Stock Stage a Comeback in 2019?
Shares of the company has displayed some resilience of late. In fact, the stock has increased 6.7% month to date, outperforming the industry’s growth of 1.6%. The recent surge can primarily be attributed to better-than-expected Macau gaming revenues as casino operators witnessed signs of recovery in November after months of weakness owing to China’s economic slowdown.
However, the scenario for 2019 is still not encouraging for Wynn Resorts. Per the Zacks Consensus Estimate, the Zacks Rank #5 (Strong Sell) company’s earnings in 2019 are likely to witness a decline of 9.3% year over year, compared with the industry’s collective growth of 8%. Further, revenues in 2019 are expected to gain 3%, compared with the industry’s estimated increase of 6.5%.
Hopes Hinge on Sports Betting Legalization
The legalization of sports betting outside Nevada holds a lot of prospect and it is to be seen how much the company can capitalize on it. Notably, Wynn Resorts, entered into an agreement with BetBull Limited (“BetBull”) — a sports betting operator based in Europe. Wynn Resorts and BetBull’s digital sports betting platform will leverage the developing sports betting market in the United States.
In an effort to strengthen foothold in the gaming industry, Wynn Resorts seems to be banking on sports betting, following the legalization outside Nevada. In May 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act (“PASPA”) that banned sports betting outside Nevada. The court withheld the legitimacy of a 2014 New Jersey law, which allows sports betting at casinos and racetracks in the state. The decision also broke the Nevada's monopoly on the betting market. The Court ruling also opened door for other states to enter sports betting business.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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