Wynn Resorts Ltd. (NASDAQ: WYNN) isn’t as flashy as other casino names, but don't write it off. It has been quietly working to improve its operations, invest in new properties and position for growth, and those efforts are paying off. The first quarter (Q1) results were mixed relative to the analyst's consensus targets.
There are so many offsetting positive factors within the results that a slim miss in GAAP earnings related to restructuring and non-cash impairment is easy to overlook. The takeaway is that business is quickly returning to pre-pandemic levels and may be reached by the end of the year. This drives robust cash flow for the company, allowing it to reduce and reposition debt while building cash reserves and resuming the Wynn Resorts stock dividend.
Wynn Has Solid Quarter on Strength in all Properties
Wynn Resorts had a solid quarter driven by double-digit strength at all properties. The company reported $1.42 billion in net revenue, up 49% year-over-year (YOY) on triple-digit gains in Macau. Both Macau properties saw their revenue more than double due to the resumption of travel in the region. The company also reports win rates are below average, which is helping to drive cash flow. The adjusted property EBITDAR grew by 142% across the network, led by record levels in the U.S. and “meaningful improvement” in Macau.
The bottom line results are mixed, with GAAP EPS at a nickel short of the MarketBeat.com consensus. That is largely due to increased credit reserves and preopening expenses that are not expected to repeat in the current or following quarters (assuming no more COVID-related lockdowns or otherwise). The offsetting factor is 29 cents in adjusted EPS, which beat the consensus by almost $0.50 and reversed a significant loss in the prior year.
The company did not give guidance but showed clear momentum in the business. However, analysts expect an acceleration of growth to over 60%, which may underestimate the business. Revenue for the second quarter (Q2) is pegged at $1.49 billion, up only 4.9% sequentially and may not factor in the full strength of the global tourism rebound and reopening in China.
The Analysts Raise their Targets for Wynn Resorts
Wynn Resorts' results were not enough to spark a significant rally but have resulted in several boosted price targets. Analysts at Barclays PLC (NYSE: BCS), Stifel Financial Corp. and Citigroup Inc. (NYSE: C) raised their targets to $120, $137 and $138 compared to the $116.25 MarketBeat consensus figure. This activity has the consensus figure trending higher than last year, last quarter and last month and trading near the recent highs. The three new targets have this stock trading above a two-year high, putting it on track to reach the highest levels since the pandemic began.
And the institutions are buying Wynn Resorts. The institutional activity has been overwhelmingly bullish for the last 12 months netting shares in a ratio greater than three to one. Activity spiked in Q1 2022 and has slacked off since but remains bullish on balance. The institutions own about 71% of the company and may buy more, given the Q1 results.
The Technical Outlook: Wynn Consolidates
Shares of WYNN have been trending higher this year but entered a consolidation that has yet to break out. The bias is toward the upside, but there is the risk of a move to $100 to retest support at the 150-day moving average. Either way, the market appears to support above the 150-day moving average, so the trend should remain intact. A sustained rally may form if the market can form a bullish flag and move higher from this point.