Shares of Wynn Resorts (NASDAQ: WYNN) have declined by 18% this year, while the S&P 500 shows a gain close to double digits, as investors express concerns over the company’s project in the United Arab Emirates (UAE) along with weaknesses in Macau.
Stifel analyst Steven Wieczynski describes the current market scenario for Wynn as “somewhat crazy.” He points out that the peculiarities surrounding Wynn’s stock indicate that the market is placing “almost zero value” on the company’s Macau and UAE ventures.
“While we fully acknowledge the current lack of investor interest in Macau-focused stocks and those impacted by the ongoing Middle Eastern conflict, we believe that Wynn’s present trading levels reflect a valuation that almost excludes any worth for their Macau and UAE projects, which we think is excessively pessimistic,” states the analyst.
He maintains a “buy” recommendation on Wynn stock with a price target of $140, suggesting a potential upside of 42.1% from its current trading price.
Challenges Facing Wynn Stock
Identifying the issues affecting Wynn stock this year is straightforward. In Macau—a crucial market for the company’s revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA)—gross gaming revenue (GGR) is low, while promotional spending is on the rise.
Adding to the Macau GGR troubles is the World Cup, which is nearing its conclusion and affecting the appetite for casino betting. Recent visitor trends indicate that many are not engaging in gambling. In essence, although visitation numbers are strong, they are failing to translate into GGR growth for operators like Wynn.
The situation with Wynn Al Marjan Island, the company’s $5.1 billion casino resort, is also straightforward. This venue is not yet operational (scheduled to open in 2027) and, while it holds the potential to meet Wall Street’s long-term growth expectations for Wynn, it exposes the stock to vulnerabilities amidst the ongoing Iran conflict.
“Eventually, investors will need to recognize that trading levels for WYNN are essentially reflecting a negative value for their assets in Macau and/or the UAE, a trend we believe is already occurring,” Wieczynski adds.
The analyst estimates that the UAE project alone could contribute between $19 and $25 to Wynn’s share value.
Why Wynn Stock Appears Undervalued
Wieczynski provides a breakdown to support the argument that Wynn stock is undervalued at its current price, around $98.
He estimates that the company’s Las Vegas properties could account for $45 of the share price, while Encore Boston Harbor adds about $7, and Wynn’s unutilized Las Vegas land contributes approximately $3. Assigning a value of $20 for the UAE project brings the total to $75. Adding an estimated $11 from Wynn Macau royalties results in a total of $86.
“Regardless of the market conditions you wish to factor into Macau valuations, there’s no reasonable basis for stating that their Macau assets are worth roughly $10 per share,” concludes Wieczynski. “This logic doesn’t add up. Even if we are overly optimistic regarding our UAE projections, it likely signifies that we are undervaluing their Macau operations. In any perspective you adopt, the market is either undervaluing Wynn’s Macau or UAE assets.”