Wynn Resorts, Limited WYNN is likely to benefit from solid Macau performance, non-gaming revenue-boosting strategies and expansion efforts. Also, focus on non-gaming investments bodes well. However, increased operating expenses is a concern.
Let us discuss the factors that highlight why investors should retain the stock.
Factors Likely to Drive Growth
Wynn Resorts derives a solid share of revenues from Macau — the most prominent gaming destination in the world. The worst seems to be over for Macau's gaming industry as China's economy is slowly gaining momentum. During the second quarter of 2023, Wynn Resorts witnessed growth in Macau's mass gaming, luxury retail and hotel businesses, portraying exceptional post-Covid recovery.
During the fourth quarter of 2022, Wynn Resorts (Macau) entered into a 10-year agreement with the Macau government to renew its gaming concession, covering Wynn Macau and Wynn Palace Cotai. The company is confident that the proposed capex and programming will drive growth in the upcoming periods. For 2023 (through 2024), the company expects capex related to concession commitments to be in the range of $300-$400 million.
Wynn Resorts focuses on non-gaming avenues to drive growth. In second-quarter 2023, the company’s non-gaming business witnessed robust growth owing to strength across retail business. The non-gaming business witnessed robust growth owing to strength across the retail business. During the quarter, non-gaming revenues increased 3.8% year over year to $55.1 million. Attributes such as quality product and service offerings, the relaunch of the loyalty program (in Macau) and the robust non-gaming events calendar added to the positives. Moving ahead, the company emphasizes innovative non-gaming investments to boost tourism and strong shareholder returns. This includes investments in a new theater and events and entertainment center, incremental parking, food and beverage and entertainment amenities. During the second quarter of 2023, the company stated advancement concerning the East of Broadway expansion project in Boston.
The emphasis on the expansion of new markets bodes well. Wynn Resorts and Marjan, RAK Hospitality Holding recently inked an agreement to develop a multibillion-dollar integrated resort on the artificial Al Marjan Island in Ras Al Khaimah, United Arab Emirates. This move marks Wynn Resorts’ foray into a new market. The resort is scheduled to open in 2026. This will mark the company’s first resort in the MENA region. During the second quarter of 2023, the company progressed with respect to the project design. Also, optimism can be noted due to opportunities arising from the backdrop of beachside setting development.
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In the past year, shares of Wynn Resorts have surged 54.6% compared with the industry’s 16.7% growth.
Increased operating expenses are a concern for the company. During the second quarter of 2023, the company’s total operating expenses came in at $ 1,345.5 million compared with $960.9 million reported in the prior-year quarter. The upside was primarily due to a rise in casino, room, food and beverage, entertainment, retail and other and general and administrative expenses. However, this was partially offset by a fall in property charges and other expenses. The company remains cautious of wage inflation and interest rate increases.
Zacks Rank & Key Picks
Wynn Resorts currently carries a Zacks Rank #3 (Hold).
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