Wynn Resorts, Limited (WYNN - Free Report) is likely to gain from solid performance by Wynn Palace, Wynn Macau and Las Vegas operations. However, the trade war between Beijing and Washington is likely to hurt gambling stocks, and Wynn Resorts is no exception. Let’s delve deeper.
Wynn Resorts generates a solid share of its revenues from Macau resorts. Apart from the gaming business in Macau, the company has been increasingly focusing on driving non-gaming revenues. Given the decent visitation pattern in Macau, infrastructure development and government’s efforts to boost tourism in over there, and non-gaming sources are expected to boost revenues going forward.
Moreover, the company’s full-scale integrated resort in Cotai, Macau, is poised to witness increased visits from tourists and leisure gamblers over the long term, which should fortify the company’s position in the Cotai strip. Notably, such projects are expected to draw business and leisure travelers, and provide a solid platform for growth. In fact, building resorts in Boston and Macau will help the company capitalize on strong consumer spending trend in the region.
Meanwhile, in Las Vegas, the company is working on two new restaurant concepts that are expected to make significant additions to the non-gaming business. Not only this, Wynn Resorts plans to open new retail and a convention center in Las Vegas in the next 12-18 months.
Wynn Resorts, which shares space with Las Vegas Sands Corp. (LVS - Free Report) , MGM Resorts International (MGM - Free Report) and Penn National Gaming, Inc. (PENN - Free Report) , recently opened Encore Boston Harbor in Massachusetts. The company stated that it will upgrade Encore Boston Harbor to be a top-performing casino in the northeast. Meanwhile, Wynn Resorts too has been offering various promotional allowances and undertaking initiatives to attract gambling patrons. Also, the company is undertaking several initiatives and building newer concepts to boost non-gaming revenues in Macau.
Moreover, the opening of the world's longest sea-crossing bridge and tunnel in the prior year, which connects Macau to Hong Kong as well as mainland China's Pearl River Delta, is likely to prove beneficial to the casino operator. Wynn Resorts stated that it is redesigning Wynn Macau the entire original casino and also remodeling the Encore Tower Suites.
The flagging China property price has adversely impacted the high-end VIP segment. Wynn Resorts has been offering various promotional allowances and undertaking initiatives to attract gambling patrons in Macau. The companies face substantial threat on the face of a potential outbreak of a trade war.
Wynn Resorts’ heavy reliance on debt financing remains a concern. At the end of second-quarter 2019, total outstanding debt amounted to $9.15 billion, including $3.11 billion of Wynn Las Vegas related debt, $3.71 billion of Macau debt and $983 million of Wynn America debt. Moreover, the company might fail to finance its upcoming projects due to a higher debt burden. Also, any downturn in the macroeconomic and credit market conditions is likely to make it difficult for the company to pay or refinance debts moving ahead.
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