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Hello. As the Editor of The Money Journal (money-journal.com), I have devoted a lifetime to the study of stock, financial markets, investing, and successful money management. I invite you to read my articles and posts, and I hope that you enjoy the advice, guidance and inside secrets that I share.
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  • Why Wynn Won't Win 0 comments
    Aug 13, 2013 11:20 PM | about stocks: WYNN, WYNMF

    Recently, a Goldman Sachs strategist identified what he thinks are the most undervalued stocks. One of those, to my surprise, was Wynn Resorts (WYNN).

    Forget the fact that it's trading near its 52-week high (144.99)... or that they have over $7 billion in debt... or that the company reported 2nd qtr 2013 earnings of $1.51 per share on 7/29/13. This missed the $1.57 consensus of the 24 analysts covering the company.

    The really frightening news is that the company is excitedly pumping $4 billion into building a new property in Macau. That's right, $4 billion. And that's right, Macau.

    Wynn already has a property in Macau, and it did about $300 million in business last year.

    By my rough calculations, if the new property does the same numbers (which is a big unknown), it will take over 13 years just to break even.

    So here's a question for any reader to ponder: Assuming you had the cash, would you invest $4 billion to earn $300 million a year?

    No, neither would I. But in the Wynn's case, the matter is more serious because that $4 billion isn't their money... it's borrowed. So it has to be paid back, presumably with interest. And if their only earning less 8% on their investment, and they have this enormous debt, plus operating expenses, how do they intend to actually make money?

    From where I'm sitting, this looks not like a winner, but like a loser.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Leisure, hotels, casinos Stocks: WYNN, WYNMF
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