Wynn Resorts shares have performed remarkably well this year, gaining 12.8%, outperforming the S&P 500 by more than 600 basis points.
According to JPMorgan analyst Joseph Greff, Wynn is seen as a great value play right now.
JPMorgan says appreciation is the result of several factors
Greff reiterated an “overweight” rating on the casino‘s shares and raised the price target to $123 from $118, implying an upside of about 19.5% from current levels.
He highlighted several reasons contributing to this positive outlook, including China‘s macro and geopolitical risks.
In other words, a potential positive change in investor sentiment regarding Macau/China’s investment capacity and an underestimated development pipeline.
Macau is Wynn’s largest operating market, and its Wynn Macau unit manages two integrated resorts in the special administrative region (SAR).
Recently, Wynn Macau and Wynn Palace have gained market share, helped by a shift towards mass premium customers.
One of the main points highlighted by Greff is Wynn’s product pipeline, which includes Wynn Al Marjan Island in the United Arab Emirates (UAE), whose construction recently began.
Although there are concerns about the approval of casino gaming in the UAE, Wynn is confident that gaming will be permitted there.
If this happens, Wynn Al Marjan Island could be the first regulated gaming floor in the Arab world, providing Wynn with a significant competitive advantage in the region.
Wynn Resorts projects to generate more than US$230 million on the Las Vegas Strip
Thus, the JPMorgan analyst believes the UAE project could add up to $10 to Wynn’s share price.
Additionally, Wynn’s pipeline includes efforts to obtain a gaming license in New York, although there is still no clarity on the timeline for that project.
But as for cash flow, Wynn expects to generate $238 million from its Las Vegas Strip locations this quarter.
This is a forecast considered achievable by Greff and other analysts. He also highlighted that Wynn Macau’s cash flow in the first quarter could reach US$313 million. This is more than what Wall Street predicted at around US$304 million.
Therefore, with an increase in cash flow, Wynn could be well positioned to return capital to shareholders. This could happen through share buybacks or higher dividends.
