Future Developments Will Unlock New Gaming Opportunities

Key Takeaways

• Strategic expansion initiatives, including opening new markets and enhancing existing properties, are expected to drive strong revenue and long-term earnings growth.
  
• Effective cost management and stock buybacks reflect financial confidence, reinforcing net margins and potentially boosting shareholder value through increased earnings per share.
  
• Economic and competitive pressures, along with supply chain challenges and tariff uncertainties, threaten future revenue growth and necessitate careful financial strategies.

Catalysts

Designs, develops, and operates integrated resorts.

• Wynn Resorts is seeing strong future development opportunities, including plans to open Wynn Al Marjan Island, which is expected to enhance revenue by entering a new potential $5+ billion gross gaming revenue market.
  
• The company is actively managing operating costs, such as adjusting sourcing strategies in response to tariff impacts, to maintain healthy net margins amidst external economic pressures.
  
• Strong revenue growth is anticipated from the introduction of new amenities at existing properties, like the Gourmet Pavilion food hall in Macau, which is already increasing visitation and is expected to drive additional revenues.
  
• Wynn Resorts plans to continue stock buybacks, having already repurchased $200 million in Q1 2025 and $100 million in Q2 2025, indicating confidence in their undervalued stock and potentially boosting earnings per share in the future.
  
• With robust cash flow and a significant liquidity position, Wynn Resorts is well-positioned to pursue strategic developments and capitalize on expansion opportunities, enhancing long-term earnings growth.

Wynn Resorts Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Wynn Resorts's revenue will grow by 2.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.0% today to 8.2% in 3 years time.
• Analysts expect earnings to reach $621.7 million (and earnings per share of $5.41) by about May 2028, up from $501.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $703 million in earnings, and the most bearish expecting $505 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.1x on those 2028 earnings, up from 17.7x today. This future PE is lower than the current PE for the US Hospitality industry at 21.9x.
• Analysts expect the number of shares outstanding to decline by 5.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.93%, as per the Simply Wall St company report.

Wynn Resorts Future Earnings Per Share Growth

Risks

• The delay in $375 million of CapEx projects due to tariff rates could hinder future revenue streams or operational efficiency improvements that might have originated from these upgrades and developments.
  
• The high competition in the Macau market, especially in the premium mass market segment, might pressure revenues and EBITDAR margins, potentially affecting overall earnings.
  
• Uncertainty around tariffs and their impact on consumer demand in the U.S. could affect revenue and net margins if sourcing and operations costs increase or consumer spending declines due to economic shifts.
  
• Reliance on affluent consumer bases in uncertain economic climates creates potential revenue risks if economic conditions change and impact spending habits.
  
• Supply chain disruptions or changes in tariffs might increase costs or delay construction and development plans, thereby affecting future revenue growth and necessitating a cautious financial strategy on CapEx.

Valuation

• The analysts have a consensus price target of $106.986 for Wynn Resorts based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $132.0, and the most bearish reporting a price target of just $83.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.6 billion, earnings will come to $621.7 million, and it would be trading on a PE ratio of 21.1x, assuming you use a discount rate of 10.9%.
  
• Given the current share price of $83.52, the analyst price target of $106.99 is 21.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.