On Friday, Morgan Stanley raised its rating on Wynn Resorts (NASDAQ:WYNN) stock from Equal-weight to Overweight, adjusting the price target to $104 from the prior $97.
The revision reflects an anticipated 25% upside to the new 12-month price target. The upgrade is attributed to a combination of factors that suggest a favorable risk-reward balance and potential for re-rating.
The firm identifies three main catalysts that could drive the re-rating of Wynn Resorts. First, there is an expectation of greater stability in Las Vegas compared to the overall market.
Second, details about the growth opportunity in the United Arab Emirates are expected to be disclosed at an analyst event scheduled for October 8. Lastly, the possibility of increased capital return to shareholders is seen as a positive influence.
The valuation of Wynn Resorts is considered attractive, currently trading at approximately 8 times the Consensus Next Twelve Months (NTM) Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) ratio.
This is below the pre-pandemic average of around 12 times. Additionally, the U.S. component of the business is trading at roughly 9 times consensus EV/EBITDA, which is also below the historical average of about 12.5 times.
According to Morgan Stanley, the current discounted valuation presents an asymmetric risk-reward situation. The firm believes that the stock's valuation has created an opportunity for investors, and with the upcoming catalysts, there is a potential for a re-rating in the near future.
In other recent news, Wynn Resorts has been actively managing its financial strategy. Amid a series of recent developments, the company reported a record second-quarter EBITDA of $572 million, contributing to a significant reduction in gross debt by over $1.1 billion.
Wynn Resorts issued $800 million in senior notes due 2033, with a 6.25% interest rate, intending to use the proceeds for the redemption of existing 5.5% Senior Notes due 2025 and for general corporate purposes. In addition, Wynn Resorts secured additional funding and extended the maturity dates of its loans through $140.5 million in credit amendments.
Furthermore, its indirect subsidiary, Wynn Macau (OTC:WYNMF), Limited, amended its existing loan agreement, extending the maturity date of its outstanding loans to September 16, 2028.
This strategic financial move provides Wynn Macau with a longer time frame to manage its financial obligations. Despite adjusting their price targets, analyst firms Stifel Financial (NYSE:SF) Corp and Deutsche Bank maintained their Buy ratings on the company's shares.
On a different note, Chinese stocks experienced a notable upswing following the announcement of substantial stimulus measures by Beijing. Prominent Chinese companies such as Alibaba (NYSE:BABA) Group, JD (NASDAQ:JD).com, and PDD Holdings saw significant gains in their shares. The stimulus announcement also had a positive impact on commodity-linked stocks, particularly in the mining sector.
These are all recent developments, and investors should stay informed about these changes in the financial landscape.
InvestingPro Insights
InvestingPro data showcases Wynn Resorts' (NASDAQ:WYNN) impressive gross profit margins at 69.02% over the last twelve months as of Q2 2024, reflecting a strong ability to control costs relative to revenue. With a market capitalization of $10.01 billion and a P/E ratio of 11.75, the stock's valuation is noteworthy. Furthermore, the revenue growth of 44.65% over the last twelve months indicates a robust expansion in the company's operations.
An InvestingPro Tip highlights that Wynn Resorts has experienced a significant return over the last week, with a 14.2% price total return, and a strong return over the last month at 18.16%. These figures suggest a positive trend in the stock's performance in the near term. Additionally, analysts predict the company will be profitable this year, a factor that could contribute to the potential re-rating Morgan Stanley anticipates.
For investors seeking more insights, there are numerous additional InvestingPro Tips available, including analysis on shareholder yield and stock price volatility, as well as advanced metrics on the company's financial health and future projections. To explore these further, visit https://www.investing.com/pro/WYNN.
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