Investors in Wynn Resorts (NASDAQ:WYNN) are feeling the heat after the casino behemoth saw its stocks take a tumble following bad news from Macau, one of the gambling capitals of the world. A late June slowdown in business has seen gaming revenues emanating from Macau plummet, with dire results for casino stocks around the market. Few companies have been hit as badly as Wynn Resorts, however, which has been struggling all year.
Here’s how Wynn Resorts are shaping up after recent disappointing results, and what would-be investors will want to know about the company’s dire straits before throwing their money behind it.
Revenues are up, but not by enough
Wynn Resorts has much of its business tied up in Macau, where the gaming industry is in a peculiar spot right now; technically speaking, gaming revenues in Macau actually swelled by some 25.9 percent in June, for instance. Nonetheless, casinos that rely heavily on revenue streams from Macau are hurting, primarily because that 25.9 percent figure was short of the 26.8 percent growth that was actually expected by industry analysts. The disappointing financial results have had wide-ranging consequences around the market, and hit Wynn Resorts and other Las Vegas giants particularly hard.
The slump in expected revenue growth was likely due to a visit to Hong Kong my Chinese President Xi Jinping, which caused weekend revenues in casinos to slump thanks to a decline in tourism. Wynn Resorts has two hotels in Macau, and has previously relied on revenues from Macau to fund expansion projects. An ambition to open up an additional strip hotel in Las Vegas was primarily borne of profits from Macau, for instance. This could be worrying to some investors, because future geopolitical events in the region could disrupt revenues from Wynn Resorts holdings in Macau in the near future, too.
Some analysts also consider the hefty amounts of attention and money the World Cup is receiving right now to be partly responsible for the decline in attention being paid to gambling resorts in Macau. As China’s only legal casino hub, it’s essentially a vital artery in the gaming industry, and companies like Wynn Resorts simply can’t afford additional bumps in the road when it comes to future income derived from Macau-based holdings.
On the bright side, Wynn Resorts may have an easier time with authorities in Macau in the near-future. That’s because Steve Wynn, the former chairman and CEO of Wynn Resorts, has resigned from his position in disgrace after allegations of sexual misconduct were made against him. While this was bad news for the company’s image, he had a poor relationship with authorities in Macau that could perhaps be mended now that he’s out of the picture.
Wynn Resorts needs to calm investors
If Wynn Resorts wants to prevent this bad news from seriously hampering its stock performance in the long-term, it needs to do more to reassure investors that their financial futures are safe and sound. Stocks plummeted by more than 8 percent at one point thanks to the bad news from Macau, after all, so it’s more than fair to say that many shareholders are likely anxious about how the company’s executives will respond to the recent dip in revenue.
Future hotel expansions and casino online projects could be indefinitely delayed if revenue continues to slump, although Macau’s gaming industry as a whole does seem to have a fairly bright future ahead of it. The only good news for Wynn Resorts amidst all this Macau-madness it that many of its competitors are feeling the heat, too; MGM Resorts and Las Vegas Sands are two major competitors of Wynn Resorts, and both are faring poorly on the market after the recent revenue woes, too. Thus, investors concerned about Wynn Resort’s unique situation are thus likely to be relieved by the fact that this problem isn’t unique to Wynn alone.
The gaming industry as a whole has many reasons to be optimistic about the future, too. After all, sports gambling was recently legalized, which could usher in a new era of gaming spending that could buoy companies like Wynn Resorts, who are well-positioned to exploit this recent legal development. If traditional Las Vegas titans like Wynn Resorts can capitalize on the rapidly emerging sports gaming market, they’re likely to see additional sources of revenue that could help offset losses in Macau. If China’s gambling hub continues to see dire days, however, Wynn Resorts and other mainstays of the Las Vegas strip are likely in for a grim performance in the market. Don’t look too much into the recent dip in Wynn Resorts’ stocks; the lackluster figures from Macau aren’t the end of the world, and aren’t likely to repeat themselves. Similarly, new opportunities opening up in the gaming industry present companies like Wynn Resorts with plenty of opportunities to win back lost business.