Wynn New York Pitch Viable, Digital Unit Could Take Time to Deliver Upside

Posted on: April 1, 2023, 01:51h. 

Last updated on: April 3, 2023, 11:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Through the first quarter, Wynn Resorts (NASDAQ: WYNN) stock is strutting its stuff. But upside by way of a New York casino and contributions from WynnBET are far-off prospects, according to one analyst.

Wynn stock
Encore Boston Harbor and the WynnBet logo. It could be a while before that unit contributes to Wynn’s stock upside. (Image: Casino.org)

In a recent note to clients, Deutsche Bank analyst Carlo Santarelli lays out a bull case for Wynn shares, citing several catalysts. Those include the ongoing Macau resurgence, strength on the Las Vegas Strip, impressive results at Encore Boston Harbor, and in the longer-ranging category, its casino resort project on Al-Marjan Island in the United Arab Emirates (UAE).

Construction on the UAE venue started last week, with a target opening date of sometime in 2027. Santarelli argues investors aren’t fully pricing the benefits of that venue into Wynn shares. It will be the first gaming venue in the Arab world and a multi-billion dollar project. But Wynn’s financial exposure is defrayed due to its minority owner status.

“In our view, the project is well positioned to generate strong returns,” Santarelli continued, citing a population of 10 million (90 percent of them expatriates and thus allowed to gamble), plus 22 million tourists per year, “along with a tax structure comparable to Singapore’s, in the neighborhood of 13 percent,” observed the analyst.

Wynn New York Benefits Could Be Far Off

Partnering with real estate developer Related Cos., Wynn is aiming to bring a casino hotel to New York City. The companies are eyeing a site at the Hudson Yards, near 11th Avenue. The Las Vegas-based operator is among a slew of gaming companies competing for what very could be just one downstate permit.

While we would be hard pressed to call WYNN, or anyone else for that matter, a favorite in the process for the 3rd downstate license, we believe WYNN has a compelling location/pitch for the NYC property,” Santarelli noted.

The analyst added that Wynn could generate a 15% return on investment (ROI) from the New York project — assuming it’s granted a license — but it could be 2024 when New York officials make decisions on the recipients of the three downstate permits.

Bottom line: It’ll be a while before clarity on the New York City casino scene emerges and even longer before the region could benefit Wynn stock.

Don’t Expect Much from WynnBET

There are clear catalysts for Wynn stock – some playing out now and others longer-ranging. Santarelli doesn’t see the operator’s Wynn Interactive unit, also known as WynnBET, as one of them.

We don’t have high hopes for a day in which Wynn Interactive is a meaningful value driver of the shares,” the analyst wrote.

The business is trending in the right direction, as it lost $99 million last year, compared with $267 million the year before. But that’s still profitable at a time when rivals are already there or close to reaching profitability. The recent debut of online sports betting in Massachusetts could spark WynnBet.

“If nothing else, we believe the drag on headline results will abate in the near term, with the potential for an upside surprise, should WYNN generate adequate share in the Massachusetts OSB market, given their physical presence in the state and their retail launch ahead of the online launch, which should have helped with early, and cost-efficient, customer acquisition,” concluded Santarelli.