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Wynn Resorts stock undervalued, analysts says

Updated March 24, 2020 - 11:12 am

In January, shares of Wynn Resorts Ltd. stock traded at around $153 a share.

A week ago, it was down to a 52-week low of around $35.

What happened?

A New York-based gaming industry analyst says Wynn Resorts Ltd. stock is undervalued and that the company’s strong liquidity position enables it to endure through the coronavirus pandemic for at least 17 months.

In a report to investors Tuesday, Joe Greff of JP Morgan said Wynn shares are worth far more than the $57 trading price it was at earlier in the week.

Up 20% Tuesday

In trading Tuesday, Wynn was among several gaming companies enjoying a double-digit percentage upswing resulting from optimism that Congress was on the verge of approving a relief package. On Tuesday, Wynn shares closed up $8.99, 15.6 percent, to $66.56 a share on volume 2½ times the daily average. After hours, it climbed another $3.44, 5.2 percent, to end at $70 a share.

A year ago, Wynn shares were trading at around $118 a share. Since then, the stock has had a roller-coaster ride, climbing as high as $153 on Jan. 17 but plummeting to $35 on March 18.

On the day after the government of Macao ordered the region’s 41 casinos closed for 15 days, Wynn shares fell about $7 — more than 6 percent — and the company announced it was losing $2.6 million a day there.

Greff’s report said Wynn’s assets in Macao alone are worth an estimated $54 a share, meaning that investors consider the company’s Las Vegas and Boston assets worth just $3 a share.

“To us, this seems overly harsh — an almost zero net value for LV and Boston,” Greff’s report said.

“Our view today isn’t that Macao (Special Administrative Region) is getting less bad in the near term (it’s really not), or that the (International Visa Service) policy is being relaxed next month (impossible to call that, but not impossible to start to see that’s probably the next potential positive catalyst for Macao SAR, other than a scientific-medical break-through), nor that LV will rebound quickly,” he said. “Rather, our note today highlights that these low levels are good entry points for those with a longer time horizon and a buy-and-hold view.”

Strong liquidity position

Greff also said the company’s liquidity position is strong, giving it “ample breathing room for a prolonged period of low to no revenues.”

The analyst admitted that the magnitude and duration of the COVID-19 outbreak remain uncertain, “but it should not have a permanent, forever impact.”

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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