Shares of Wynn Macau have taken a hit as casino activity in the region falls short of expectations. Analysts predict that gambling in Macau will still see growth for the rest of the year.
On Friday afternoon, Wynn Macau’s shares dropped by 14% to HK$6.02, marking their worst performance in over a year.
These declines come despite the company’s positive third-quarter results.
Wynn Macau announced that its revenue in the third quarter was seven times higher compared to the same period last year. This indicates a resurgence in gambling activities as China relaxes pandemic-related restrictions.
Furthermore, the net loss of Wynn Resorts’ Macau operations decreased to US$6.2 million from US$242.0 million last year. Adjusted earnings before interest, taxes, depreciation, and amortization also recovered to approximately 85% of pre-Covid levels.
However, analysts were not fully satisfied with these results.
Wynn Macau Struggles in Q3, Analysts Concerned but Optimistic
Citi analysts George Choi and Ryan Cheung have expressed their disappointment with Wynn Macau’s third-quarter Ebitda performance. They cited lower-than-expected retail sales and a surprisingly low mass hold rate at the company’s peninsula property as the main factors contributing to this underperformance.
As a result, the analysts decided to revise their target price for the stock, lowering it from HK$10.30 to HK$9.65. However, despite this adjustment, they have maintained their buy call, primarily because of the shares’ current weakness. Indeed, the stock has declined by approximately 30% throughout the year and is now trading well below historical averages.
Looking ahead, Choi and Cheung believe that the business outlook for the company in the fourth quarter remains strong. They highlight October’s impressive 98% hotel occupancy rate as a positive indicator. Additionally, they note that Wynn Macau’s market share has remained relatively stable, just above 13%.
Pianpian He, an analyst with Huatai Securities, emphasizes that it will take time for Wynn Macau to shift its focus from VIP customers to attracting a broader non-VIP customer base and boosting non-gaming revenues. Currently, the casino’s gross gaming revenue stands at around 65% of pre-pandemic levels, which is slightly below the industry average of 69%, according to He’s research note.
The question remains whether the company can successfully entice customers to return for repeat visits and effectively facilitate the transformation of its clientele, adds He.