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Bear of the Day: Wynn Resorts, Limited (WYNN)

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Wynn Resorts (WYNN - Free Report) has fallen victim to circumstances that are completely out of its control. The coronavirus has devastated industries that require people to be in close quarters, especially “non-essential” activities, of which casinos and resorts are near the top of the list alongside concerts, movie theaters, and more.

Despite making a comeback off its lows, WYNN, like other travel and hospitality stocks, are still down big in 2020. And even as the economy rebounds and people try to return to more normal lives, the coronavirus might prevent a real comeback for Wynn and others for some time.

Bad Cards

Wynn owns and operates Wynn Las Vegas, as well as Encore Boston Harbor, Wynn Macau, and Wynn Palace, Cotai. The company posted two solid years of revenue growth in FY17 and FY18, with a slight (1.6%) sales decline last year. Then the coronavirus turned into a global pandemic, which caused its first quarter revenue to fall over 42%. Wynn’s sales then tumbled 95% in the second quarter, as its business came to an abrupt halt.

Luckily for Wynn and its employees and consumers, it did begin to reopen its doors over the summer and its outlook is improving. “We are pleased to be up and running again in each of our markets. In early June, we reopened nearly our entire Wynn Las Vegas and Encore campus with an intense focus on cleanliness and safety. Similarly, in Boston, we reopened Encore Boston Harbor on July 12 to a positive reception as many of our customers currently prefer to stay close to home,” CEO Matt Maddox said in prepared remarks.

“In Macau, the authorities have begun to gradually and thoughtfully ease some visitation restrictions, and we are confident the market will benefit from the return of the Chinese consumer as we move through the back half of 2020.”

 

 

 

 

 

 

 

 

 

 

 

 

What’s Next

The nearby chart shows that Wynn stock was already trending in the wrong direction well before the spring of 2020. Wynn shares have now tumbled roughly 50% in the last three years and are down over 12% in the last six months. The stock closed regular trading Tuesday at around $72 per share, which puts it about 50% off its 52-week highs.

Zacks estimates call for Wynn to post an adjusted Q3 loss of -$3.19 a share, on 72% lower revenue. The gaming giant’s fourth quarter sales are then projected to slip only 50%, with its adjusted loss expected to come in at -$1.79 a share.

 

 

 

 

 

 

 

 

 

 

 

Bottom Line

At the moment, the company’s full-year revenue is projected to fall 63% from $6.61 billion in FY19 to $2.45 billion in FY20. That said, Wall Street will likely start to take notice that Wynn’s revenue is projected to bounce back in a big way in fiscal 2021, with estimates calling for 115% expansion above the current-year estimate to reach $5.24 billion.

Wynn is still projected to report a loss in FY21 and its earnings revisions have trended heavily in the wrong direction to help it hold a Zacks Rank #5 (Strong Sell) at the moment. That said, if these positive top-line trends continue, which could be driven by its key Macau segment, investors might want to bet on a comeback. But it’s likely best to stay away until some signs of positive momentum pop up.

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