On Monday, JPMorgan (NYSE:JPM) adjusted its stance on Wynn Resorts, Ltd. (NASDAQ:WYNN) shares, reducing the price target from the previous $122.00 to $110.00, while retaining an Overweight rating on the stock.
The adjustment follows a revision of the company's second-quarter earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) for its Macau properties, now expected to be $300 million, down from an earlier forecast of $313 million.
This decrease is attributed to lower margin expectations despite a slight increase in the Gross Gaming Revenue (GGR) forecast, which now anticipates Wynn's market share at approximately 13% of Macau's total GGR of 56.4 billion MOP.
The firm also increased its second-quarter EBITDA projection for Wynn's Las Vegas Strip operations to $221 million from $215 million, citing strong fundamentals in Las Vegas, especially within the high-end segment.
JPMorgan's analysis suggests that the current valuation of Wynn Resorts is reasonable at 8.4 times the estimated 2024 enterprise value to EBITDA ratio, considering the less than stellar expectations for the second quarter in Macau and various macroeconomic risks, including consumer behavior in the U.S. and geopolitical tensions in China.
The analyst noted a shift in near-term investor expectations for Wynn Resorts compared to the previous quarter, describing the current sentiment as ranging from negative to apathetic, largely due to an anticipated quarter-over-quarter decline in Macau market share.
However, they highlighted the potential of Wynn's development pipeline, such as the Wynn Al Marjan project, which they believe is not currently reflected in the stock's price.
The new December 2024 price target is based on a sum-of-the-parts valuation approach for the 2025 estimated EV/EBITDAR, assigning target multiples of 9.0 times for Macau operations (down from 10.0 times), 10.0 times for Las Vegas, and 7.0 times for EBH.
The analyst pointed out that the lowered multiple for Macau drives the majority of the price target reduction, emphasizing that the new target is not considered aggressive.
In other recent news, Wynn Resorts has received positive attention from analysts and reported impressive earnings. Seaport Global Securities and Argus both upgraded Wynn Resorts' stock from Neutral to Buy, citing strong performance in the Macau and Las Vegas markets and setting price targets of $116.00 and $110.00, respectively. These upgrades reflect the company's robust first-quarter results and the anticipation of a quicker recovery in Macau.
In terms of financial performance, Wynn Resorts announced a record-breaking property EBITDAR of $647 million in the first quarter of 2024, with strong performance from its Las Vegas and Macau properties. Additionally, dividends were announced at $0.25 per share for Wynn Resorts and $0.075 per share for Wynn Macau (OTC:WYNMF).
Meanwhile, the company has revealed plans for global expansion, including potential developments in New York City and Thailand. However, a development project in Boston has been halted due to disagreements with local authorities. These are among the recent developments concerning Wynn Resorts.
InvestingPro Insights
As we delve into the financial health and market position of Wynn Resorts, Ltd. (NASDAQ:WYNN), key metrics from InvestingPro paint a detailed picture. The company's market capitalization stands robust at $9.54 billion, with an attractive P/E ratio of 11.21, which further adjusts to 9.57 when looking at the last twelve months as of Q1 2024. These figures suggest a company with a solid footing in the market and a potentially undervalued stock, especially when considering the impressive 68.8% gross profit margin over the same period—a testament to Wynn's operational efficiency and pricing power.
InvestingPro Tips highlight the high shareholder yield and gross profit margins as significant strengths for Wynn Resorts. Additionally, the company's liquid assets surpass short-term obligations, indicating a strong balance sheet capable of weathering potential financial headwinds. While analysts have revised their earnings downwards for the upcoming period, it is noteworthy that Wynn Resorts is still expected to be profitable this year and has been profitable over the last twelve months. These insights could be particularly valuable for investors considering the recent price adjustments and the current market sentiment. For those looking to explore further, InvestingPro offers additional tips on Wynn Resorts; using the promo code PRONEWS24 can get you up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Investors may find it beneficial to note that Wynn Resorts is trading near its 52-week low, which could present a buying opportunity for those who believe in the company's long-term prospects. For a deeper dive into Wynn Resorts' financials and for more InvestingPro Tips, interested readers can visit: https://www.investing.com/pro/WYNN. There are 9 additional tips listed in InvestingPro that could further guide investment decisions.
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