Don't Wait For Wynn To Pull Back; Aegis Capital Says Go Ahead And Buy Now

As Macau recovers, so do casino stocks. Wynn Resorts, Limited WYNN shares have rallied over 30 percent year-to-date on the heels of an early Macau recovery. Despite the young turnaround, Aegis analysts are telling investors not to wait for a pullback but to get into Wynn shares now.

The Upgrade

Aegis Capital has upgraded Wynn to a Buy from a Neutral rating and upped its price target to $121 from $95. Supporting its bullish thesis, the firm provided three key catalysts:

1. VIP and high-end premium mass segmentation leading a still early-stage Macau recovery.
2. Checks on Wynn Palace improvements.
3. Likelihood of upward consensus revisions for Macau properties.

The recovery in Macau has been led by VIP and premium mass segmentation, key factors in the turnaround, particularly as analysts initially worried that the high-end market might not return to Macau in a recovery, choosing instead to look elsewhere.

A Look Ahead

Aegis analysts are predicting strong growth in China’s gaming mecca, with the first-quarter 2017 year-over-year full Macau gross gaming revenue estimate at +10 percent, and first-quarter 2017 VIP year-over-year estimates at +14 percent.

“We believe VIP gross gaming revenue has been fueled by a slightly diminishing cooling impact from Mainland China’s anti-corruption campaign, new properties, solid junket liquidity and new credit extension mechanisms, such as Bitcoin and new/additional players,” the report read.

Aegis sees VIP trends as likely to continue, reversing the downtrend of the past four years, which saw -11 percent/-40 percent/-7 percent in calendar years 2013/'14/'16, respectively

Additionally, rumors have also been swirling around a potential Las Vegas Sands Corp. LVS/ Wynn merger.

Shares of Wynn were up over 1 percent on Tuesday at time of writing.

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