Is Wynn One of the Best Value Casino Resorts to Buy While Trading at an Unbelievably Low Valuation?

By 10BET

Wynn Resorts (WYNN) is currently experiencing a notable surge in its stock price, climbing approximately 9% in early Friday trading. This increase follows a strong fourth-quarter earnings report and trading volume exceeding the daily average. However, a recent analysis by Stifel analyst Steven Wieczynski suggests that the company’s stock price significantly undervalues its core asset – its Macau operations. He describes the current situation as “ridiculous,” highlighting the disconnect between the market’s perception and the potential of Wynn’s presence in the Chinese market.

The Understated Value of Wynn Macau

Wynn’s Macau division, encompassing two luxurious casino resorts, is a primary driver of the company’s overall earnings and revenue. Despite this substantial contribution, market valuation appears to assign minimal value to this crucial arm of the business. Wieczynski argues that the current trading price doesn’t adequately reflect the potential upside from Macau, nor does it fully account for the promising prospects in the United Arab Emirates (UAE).

“We continue to believe shares are trading at an unrealistic discounted multiple with very little credit/value being ascribed to WYNN’s Macau operating assets, and we believe WYNN’s management feels the same way given their accelerated share repurchases at current levels,” Wieczynski stated in his report.

Strategic Share Repurchases and Future Expansion Plans

Wynn Resorts has been actively engaged in share buybacks, with a plan authorized at $1 billion last November. In the December quarter alone, the company repurchased $200.3 million worth of shares, bringing the total for 2024 to $386 million. They still have $813 million remaining under this repurchase program, indicating confidence in the company’s financial health and future growth.

Looking ahead, Wynn is strategically prioritizing expansion opportunities in new markets, notably the UAE and Thailand, rather than focusing on its Las Vegas property at this time. The company recently secured $2.4 billion in financing for the Wynn Al Marjan Island resort in the UAE – the largest leisure/hospitality loan in the country’s history. This ambitious project is on track to open in early 2027 and represents a significant step into a new, potentially lucrative market.

CEO Craig Billings emphasized the company’s current focus on Wynn Al Marjan, highlighting the significant market potential of the UAE ($3 billion to $5 billion) and the early stages of their expansion in Thailand. Thailand is anticipated to finalize its casino gaming legislation this year, paving the way for construction to commence as early as 2026.

The UAE Opportunity: Undervalued by the Market

Wieczynski’s analysis delves deeper into the valuation of Wynn’s international ventures. He estimates that the Las Vegas casino hotels and Encore Boston Harbor are worth $43 and $8 per share, respectively, with an additional $3 per share attributed to the company’s property holdings. The UAE project, often overlooked by other analysts, is estimated to be worth $10 to $17 a share. Taking a conservative approach and assigning a value of $10, coupled with the estimated $11 per share from the royalty stream of Wynn Macau, Wieczynski arrives at a total of $75 per share. This contrasts sharply with Wynn’s closing price of $80.47, suggesting that the market is currently undervaluing the company’s assets by a considerable margin.

“We don’t care what kind of environment you want to price into Macau, but there is no way you can say their Macau assets are only worth ~$5/share. That just doesn’t make sense to us,” Wieczynski concludes, underscoring the compelling investment opportunity presented by Wynn Resorts at its current valuation.

Conclusion

In summary, analyst Steven Wieczynski of Stifel believes that Wynn Resorts’ stock is significantly undervalued, particularly concerning its substantial operations in Macau and its promising expansion into the UAE. The market appears to be discounting the potential upside from these ventures, creating a potentially attractive investment opportunity. The company’s strategic share repurchases further reinforce management’s confidence in the stock’s long-term value. With ongoing development in Thailand and the substantial financing secured for the UAE project, Wynn Resorts is positioning itself for continued growth and expansion in the global casino market. This presents a compelling case for investors looking for undervalued assets with significant future potential.