On Wednesday, Wells Fargo adjusted its outlook on Wynn Resorts shares (NASDAQ:WYNN), increasing the price target to $128 from the previous $125 while maintaining an Overweight rating on the stock. The adjustment reflects the firm's view that Macau operations remain undervalued in the market.
The new stock price target of $128 is based on a valuation that separates the company's Macau assets from its other operations. The non-Macau assets are valued at approximately $75 per share, while the Macau assets are attributed a value of $53 per share.
Wells Fargo's analysis suggests that Wynn Resorts' 72% stake in its Macau operations, as represented by its ownership in 1128 HK, is worth around $33 per share.
With Wynn Resorts' share price at $97, the remaining value for the Las Vegas and other non-Macau operations stands at about $64 per share. This valuation implies a low-9 times multiple, which is slightly below Wells Fargo's estimated 10 times multiple.
Moreover, the firm highlighted that 1128 HK is trading at an implied multiple of approximately 8 times its 2025 estimated earnings, compared to its historical average of 13 times. Wells Fargo anticipates that Wynn Resorts' Macau operations, which are characterized by the absence of VIP gaming, higher margins, stable operating expenses per day, and minimal concession overhangs, will eventually be revalued by the market to reflect their structural advantages.
InvestingPro Insights
As investors consider Wells Fargo's updated outlook on Wynn Resorts, real-time data and insights from InvestingPro can further inform their decision-making. Wynn Resorts boasts a strong market capitalization of $10.9 billion, underscoring its significant presence in the industry. The company's adjusted P/E ratio for the last twelve months as of Q4 2023 stands at 12.55, which may appeal to value-oriented investors looking for stocks trading at lower multiples of earnings.
InvestingPro Tips highlight that analysts have revised their earnings expectations upwards for the upcoming period, suggesting a positive outlook on the company's financial performance. Furthermore, Wynn Resorts has demonstrated impressive gross profit margins of 67.26% for the last twelve months as of Q4 2023, indicating efficient operations and strong pricing power.
For those interested in further insights, InvestingPro offers additional tips on Wynn Resorts, including predictions on profitability and stock price volatility. Readers can take advantage of these expert analyses by visiting InvestingPro's dedicated page for Wynn Resorts at https://www.investing.com/pro/WYNN and using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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