Is Wynn Resorts a ‘buy’ as Macau reopens for China?

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Written on Sep 26, 2022

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Macau says it will reopen for tour groups from China in November.
Jefferies upgrades Wynn Resorts to "buy" and announces a PT of $75.
Requisite's Bryn Talkington reveals how she's playing the Wynn trade.

Wynn Resorts Limited (NASDAQ: WYNN) ended more than 10% up on Monday after Macau said tour groups from mainland China will be allowed to visit the gambling hub starting from November.

Jefferies’ David Katz upgrades the Wynn stock

Following the much-awaited stock market news, Jefferies upgraded this stock to “buy”. Analyst David Katz raised his price target on Wynn Resorts this morning to $75 a share that translates to another 15% upside from here.

He upwardly revised estimates for the next two years and now forecasts the $7.60 billion company to see a 35% annualised increase in revenue in 2023. Just under 1.0% is his call for revenue growth in 2024.

Katz said the stock’s price-to-earnings multiple will improve as earnings and free cash flow pick up moving forward. He expects the Macau announcement to help peer Las Vegas Sands in much the same way as well.

How Bryn Talkington is playing the Wynn trade

Last month, Wynn Resorts Limited said it lost less-than-expected money in its fiscal second quarter. Its revenue, though, came in shy of the Wall Street estimates.

Still, agreeing with the constructive view on CNBC’s “Halftime Report”, Requisite Capital’s Bryn Talkington said:

I like the Wynn trade; I do think that China will reopen after election which starts next month. So, I’ll buy Wynn. But then I’ll sell the January $77.50 calls and you can collect around $5 for four months, about 7.5% yield plus you still have about 15% upside if it were to move there and get called away.

Versus its year-to-date high, the stock is currently down more than 30%.