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By Brendan GilmartinF

Summary

Wynn Resorts (NASDAQ:WYNN) rallied from 10-month lows headed into the 3Q 2011 earnings release after the close on Wednesday, October 19, thanks to evidence of solid operational performance at casinos in both Las Vegas and Macau, China’s biggest gambling market.

Even with the shares up 20% off the October lows, Wynn is now trading at 21.8x forward earnings, bringing the PEG ratio below 1.0, implying the shares are trading below the growth rate. The company is also expanding its Macau operations and seeing a y/y uptick in traffic in Las Vegas, while boasting a solid balance sheet with little debt and a respectable dividend yield.

Wynn is expected to deliver EPS of $1.18, well above the $0.39 in the year-ago period, while revenues are seen rising 28.4% to $1.29 bln (Source: Yahoo! Finance). Results toward the high end of analyst forecasts for $1.42 per share and revenue of $1.41 bln could push the shares hack toward $150.

Keep a close watch on Las Vegas Sands (NYSE:LVS) as a sympathy play off the Wynn results.

Chart Review

-Wynn Resorts shares are holding solid support near $130 – a level going back to this past June and just above the 20-Day SMA near $132. The next key level on the downside is $125 in the event of an earnings miss.

-Resistance is at $140, followed by $150.

-Note that the Average True Range (ATR), a key measure of volatility, is 8.08 – among the highest of the S&P 500 constituents, signaling the shares could experience fairly wide gyrations in reaction to the earnings release.

-Similarly, Wynn is one of 12 S&P members with a beta greater than 2.50, underscoring the degree of volatility in Wynn shares.

WYNN1
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WYNN2
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Source: Volatility Alert For Wynn Resorts 3Q 2011