The Growth In Wynn Resorts Stock Will Trump Any Scandal

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Editor’s note: Since this story was published, the Crown Resorts deal has been called off. 

While small investors watch, fascinated, on the sidelines over its founder’s scandals, big investors are piling into Wynn Resorts (NASDAQ:WYNN) and framing WYNN stock as the best growth story in gaming.

The Growth In Wynn Stock Will Trump Any Scandal

The Massachusetts Gaming Commission is meeting in private this week over granting the company a license to operate Encore Boston Harbor, a $2.6 billion casino in Everett, near Boston, due to open in June.

They are considering sexual misconduct charges involving company founder Steve Wynn, who is 77, nearly blind and who left the company last year. But his ex-wife, Elaine Wynn, is still the company’s largest shareholder, thus subject to the state’s suitability requirements on owning a casino.

Wynn insists the company has changed, but it is still run by Matthew Maddox, a Wynn protégé.

Big investors are betting Wynn will get the license for Massachusetts, and the company has also made a $7.1 billion bid for Australia’s Crown Resorts, to assure future growth.

Growth covers a lot of problems. Analysts are upgrading the stock.

The Numbers Tell All

The big interest in WYNN stock can be seen in its numbers, which would do credit to a tech stock.

Last year’s revenue of $6.7 billion was 12% ahead of 2017’s $6 billion, which in turn was 43% ahead of the previous year’s $4.35 billion. Net income has surged in that time from $241 million to $572 million, and WYNN stock’s April 9 valuation of $15.59 billion is just 2.5 times revenue.

The earnings surge followed the 2016 opening of Wynn Palace, the company’s third casino in Macau, China. In addition to this year’s opening in Boston, the company plans to open its third Las Vegas casino, Wynn West, next year, on the site of the former Frontier Hotel.

The Australia deal promises even more growth. Wynn also owns 38 acres on the Las Vegas strip it can build on in the future, as well as a 130-acre golf course.

The hope of WYNN stock bulls is that the company will just pay a hefty fine in Massachusetts and that the promised 4,000 jobs will trump ethical concerns.

The Past Is Just the Past

The company no longer contests allegations that Wynn, his executives and attorneys, covered up charges of sexual misconduct, but note that none of the executives involved, including Wynn, are with the company today. In Nevada, the scandal resulted in a record $20 million fine.

Wynn, however, was able to sell his stake in the company while the investigation was underway at $180 per share, 20% higher than the stock was when trade opened April 9.

Current CEO Matthew Maddox, 43, is a WYNN protégé but insists the company has undergone a “paradigm shift” and reinvented itself.  While it seemed highly unlikely the company would get the Massachusetts license in November, when the stock traded below $100 per share, the betting has since shifted.

There are also scandals to work through at Crown Resorts, which operates in London and Australia. Crown left the Macau market after China jailed one of its executives last year, and its own leading light, James Packer, resigned from its board .

The Bottom Line on WYNN Stock

Assuming WYNN wins the Massachusetts license and can fill its executive suite with honest people, the purchase of Crown Resorts, and its existing holdings in land, give it a runway for growth that could last many years.

But you’re still betting that Maddox can be a younger Steve Wynn (born Steven Weinberg), only without the tsuris (which is Yiddish for aggravation).

Dana Blankenhorn http://www.danablankenhorn.com is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family https://www.amazon.com/Reluctant-Detective-Finds-Her-Family-ebook/dp/B07FSRDR4Y/, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned no shares in companies mentioned in this article.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


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