Wynn Resorts Ltd. (WYNN) fell 25% in 2021, adding to a two-year cumulative loss of 61%. Las Vegas casino revenue improved substantially last year despite new variants, but China’s zero COVID policy and draconian Macao restrictions kept away high rollers and VIP junkets, yielding the two worst years since 2006. Improvement is likely in 2022 but investors should lower their enthusiasm, with Morgan Stanley now projecting $15 billion in gaming revenue, far lower than the $36.4 billion booked in 2019.
China’s Long Shadow
The Nevada Gaming Board just reported that November revenue rose 71.4% year-over-year in November to $1.13 billion, with the Las Vegas Strip surging 115.9% compared to 2020’s empty casinos. Macao, which has no monthly lag, reported a modest 1.8% December improvement, highlighting continued political and biological headwinds. However, China took a giant step toward normalcy last week, announcing reforms for casino licenses, which are expiring this year.
“The Legal System of Casino Lucky Gaming Operations” proposes 9 changes intended to increase central control: (1) the number of grants for operating casino lucky betting, (2) the grant period, (3) increase statutory requirements for the supervision of approved cos., (4) employee protection, (5) strengthen the review mechanism for approved cos., gaming intermediaries and partners, (6) introduce government representatives, (7) promote projects with non-gaming elements, (8) social responsibility, (9) clarify criminal liability and administrative punishment”.
Wall Street and Technical Outlook
Wall Street consensus now stands at a ‘Moderate Buy’ rating, based upon 4 ‘Buy’, 5 ‘Hold’ and no ‘Sell’ recommendations. Price targets currently range from a low of $91 to a Street-high $131 while the stock is set to open the first session of 2022 nearly $6 below the low target. This placement reveals a major disconnect with Main Street investors, who have done a far better job evaluating major roadblocks put into place by Chinese bureaucrats in the last two years.
Wynn Resorts hit an all-time high near 250 in 2014 and entered a major downtrend that found support near 50 in 2016. Subsequent bounces posted lower highs in 2018, and 2020 while the stock plunged to an 11-year low in March 2020. The rally into March 2021 yielded another lower high while price action into 2022 is holding the .618 Fibonacci selloff retracement level in the mid-80s. Accumulation has dropped to an all-time low but the January Effect should kick into gear soon, yielding a bounce that could reach 100.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire