Wynn Resorts (WYNN) Moved to HOLD
Wynn reported earnings that fell short of estimates last night, and the stock has declined 8% as of this writing.
Even though Macau’s tourism sector is rebounding, business at Wynn’s new property on the Cotai Strip, the Wynn Palace, has gotten off to a slow start. As a result, revenue and EPS fell short of expectations this quarter. Revenue of $1.11 billion rose 11% year-over-year, but missed the consensus estimate by $10 million. EPS of $0.75 were three cents short of estimates, and lower year-over-year.
Steve Wynn blamed some of the miss at Wynn Palace on construction that is making it difficult to access the resort. The Palace may also be going after a challenging target market. The Chinese government’s anti-corruption effort is still dampening domestic VIP spending and travel, so mass market tourists are expected to be key to Macau’s recovery. But the Wynn Palace is both decidedly upscale and has fewer attractions for leisure travelers than competing resorts.
WYNN is always volatile, and the stock still has support around 87, where it bottomed in May and June. However, the big-volume selloff has definitely damaged the stock in the short-term, so I’m switching the stock from Buy to Hold today. If forward estimates deteriorate and WYNN looks to be entering a more prolonged downturn, we won’t hesitate to sell. However, for now, the stock remains within its multi-month trading range so we’ll assume this is just a temporary setback. HOLD.