Wynn on the Rise

WYNN's recent rise deserves notice. As recently as July 9, 2009, WYNN sat at $29.91 a share. Today, the stock is at $58.00, a near double. The rise is startling given the choppiness of the gaming sector. Wedbush Morgan Securities downgraded the stock just last week from outperform to neutral and gave the stock a target price of $47. Wedbush estimates that 2010 Ebitda will be $748.6 MM, reflecting a 9.5 multiple on the company's Las Vegas operation and a 12.5 multiple on its Macau operation. (See here).

Nonetheless, investors are undeterred. The share price has risen $8 a share since the Wedbush downgrade. The rise is noteworthy given the lack of consensus on the direction of the sector. As recently as late July, Merrill Lynch cut its investment rating on MGM, a Wynn competitor, from Buy to Neutral and further cut its price target from $11 to $8. (See here).

The cut further comes on the heels of Las Vegas Sands (LVS) reporting a loss of $222.2 MM for the quarter. (See here).

WYNN's Chief Operating Officer Mark Schorr recently sold shares worth $7.35 million last week according to the Wall Street Journal. (See here). He sold 149,000 shares at $49 each, some $9 per share below the current share price. WYNN'S recent second quarter earnings report showed a 91% drop in profit. The casino has dropped its room rates, and currently has rooms at $159. (See here).

The stock's recent rise may augur good things to come. But it is not for the faint of heart.

Disclosure: Author is long WYNN, MGM, LVS

Comments

[Ricard:]

Good luck on your holdings. I'm not sure why you hold MGM, it seems to be the weakest of the bunch, and probably the most overvalued as well.

Aug 14 07:41 PM