Wynn Resorts Analyst: Macau Concerns Overblown, Biden Positive For Casino Stock

The coronavirus recovery in China is a plus for a casino stock that's trading at the same levels it did in April, according to a Morgan Stanley analyst. 

The Wynn Resorts Analyst: Thomas Allen upgraded Wynn Resorts WYNN from Equal-weight to Overweight and raised the price target from $90 to $95.

The Wynn Resorts Takeaways: Concerns around the VIP market in Macau are overblown, Allen said in a Monday upgrade note.

While other regional casino stocks have improved since their April bottoms, the analyst said Wynn Resorts shares are trading near their April lows. The S&P 500 is up around 20% since April.

Shares of Wynn Resorts are down 48% year-to-date.

In 2019, Wynn Resorts reported 69% of revenue from Macau, 29% from Las Vegas and 2% from Boston, he said. 

Macau VIP revenue has only turned negative twice, Allen said: revenue dropped during a China corruption crackdown and the 2019 U.S.-China trade tensions.

The key risk is if Macau does not recover, the analyst said. 

Morgan Stanley's base case price target comes from Wynn Resorts reporting $1.6 billion in EBITDA in 2022. A bull case price target of $185 comes from EBTIDA hitting $2.3 billion.

Wynn also has upside in its small but growing online sports betting business, he said. 

Related Link: Gan Shares Surge On Sports Betting, iGaming Partnership With Wynn In Michigan

Biden Win A Positive: The relations between China and the US have been tense, and Allen said this could improve with a Joe Biden victory. 

"We believe a Biden victory while not completely resolving the tenuous trade relations btw. the US and China would at least help mitigate the extreme bear case that WYNN's concession would not be renewed," the analyst said, referring to the June 2022 expiration of Macau casino operators' concessions. 

“We would expect to see Wynn stock re-rate if Biden wins the presidency.”

WYNN Price Action: Wynn Resorts shares were trading higher by 2.9% at $74.53 at last check Monday.