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Bear Of The Day: Wynn Resorts (WYNN)

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Wynn Resorts (WYNN - Free Report) has been on a wild ride since the beginning of the US-China trade war due to its excessive exposure in the region. The coronavirus has only exacerbated its issues in the country, as the tourist market has effectively shut down till this virus can be contained. WYNN analysts are pricing in the problem and have been dropping their EPS estimates, pushing this stock into a Zacks Rank #5 (Strong Sell).

Wynn Resorts has a substantial presence in Macau, the Las Vegas of the East. In fact, roughly 70% of the company’s sales are driven by this region. The coronavirus has empty this party capital and its casinos during the city’s busiest time, Chinese New Year (also referred to as Spring Festival). The full impact of this virus on the overly exposed WYNN is still yet to be seen.

Shares have fallen 15.3% since coronavirus anxiety began roughly two weeks ago. The stock has broken down 34.5% since the US-China trade war started in the summer of 2018. WYNN appeared to be rallying up until the virus shut down its primary profit driver.

Wynn Resorts, Limited Price, Consensus and EPS Surprise

Wynn Resorts, Limited Price, Consensus and EPS Surprise

Wynn Resorts, Limited price-consensus-eps-surprise-chart | Wynn Resorts, Limited Quote

The coronavirus has now infected roughly 17,500 with 17,308 on the China mainland, almost 3 times the figure one week ago, and there is little sign of the dissemination of the disease slowing down. It could be months before this widespread disease is under control, and Wynn Resorts casinos in Macau will be re-opened. This will cost the company tens if not hundreds of millions, and I think these shares have more room to fall.

Take Away

WYNN is a sell in the short-term due to the obvious concerns surrounding the coronavirus. Once the dust settles and the quantitative implication of this disease can be understood, these shares can adequately price in the impact. This stock still has long-term potential, but its short-term risks may outweigh this potential at the moment.

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