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Casino Stocks: 2 to Hold, 2 to Fold

Macau remains the gaming industry’s hottest hand

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Hold: Wynn Resorts Ltd. (WYNN)

WynnResorts185Wynn Resorts’ (WYNN) business operations focus primarily on two segments: Macau and Las Vegas. The company operates Wynn Macau and Encore at its resort in Macau and Wynn Las Vegas and Encore at Wynn’s Las Vegas resort.

While bears fretted that a slowdown in VIP gamers from mainland China could adversely impact earnings, a surge in mass-market gaming more than compensated: WYNN’s fourth quarter earnings surged by more than 90%.

In recognition of this high-potential segment, Wynn Resorts’ Chairman Steve Wynn in January named company COO Gamal Aziz as president of Wynn Macau, a high-roller-friendly facility that boasts a Sky Casino. The company also is betting big on its new $4 billion Wynn Palace casino resort on the Cotai Strip, which is scheduled to open in the first quarter of 2016.

WYNN stock is up more than 90% over the past year, although the stock has slipped about 6% this month. WYNN stock has a PEG ratio of nearly 2.4, which looks pricey, but isn’t too bad among casino stocks, since the stock is basically a growth play on Macau.

There is volatility as the 1.5 beta (50% more volatile than the broader market) illustrates, but that’s not out of line for casino stocks. And the 2.2% dividend yield makes WYNN stock a decent bet.

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