Data out Wednesday confirm Nevada casinos posted the best May on record in terms of gross gaming revenue (GGR), which checked in at $1.32 billion of which $742 million was attributable to the Las Vegas Strip. At least one analyst believe Wynn Resorts (NASDAQ: WYNN) could be a prime beneficiary of strength among well-heeled consumers traveling to the US casino center.
In a note to clients earlier today, Macaquarie analyst Chad Beynon acknowledged that while May GGR growth on the Strip was largely driven by mass market table games and slot machines, the preferred avenue for investing in Las Vegas operators is those with high-end venues. Wynn checks that box as its namesake property and Encore are among the glitziest, highest-rated casino hotels in the world.
“We maintain our bias toward the high end, as we believe the high-end luxury consumer continues to have a willingness to spend, while lower[1]income consumers may be feeling the pinch. In this environment, we prefer operators with higher-end exposure, namely WYNN,” wrote Beynon
He reiterated an “outperform” rating and a $128 price target on Wynn, implying upside of 43% from today’s closing print.
For investors looking to capitalize on vibrancy among affluent customers frequenting the Strip, Wynn is the most practical option because it’s the purest play on that theme.
The operator’s only Las Vegas venues are Wynn and Encore, meaning its portfolio is not diluted by mid-tier properties as is the case with rivals Caesars Entertainment (NASDAQ: CZR) and MGM Resorts International (NYSE: MGM). Likewise, Venetian is operated by private equity firm Apollo Global Management (NYSE: APO), meaning that casino hotel is a small part of the broader investment thesis.
Additionally, Fontainebleau Las Vegas is controlled by privately held entities while Resorts World Las Vegas is owned by the sprawling Genting conglomerate.
Bottom line: Wynn is the Strip operator most synonymous with catering to and gaining business from an affluent clientele, it has momentum on that front and could further cement that status over the long-term with the possible addition of a third hotel tower on the Strip.
Among the major reasons why Wynn can extend its dominance among high-end visitors to the Strip is the operator’s well-documented proficiencies in the non-gaming space. Those include exquisite guestrooms and restaurants, in-demand shows, and some of the best spas and wellness anywhere in Las Vegas.
Those are selling points for prospective visitors as well as investors, particularly at a time when Strip revenue per available room (RevPAR) is sturdy.
“On the non-gaming front, Strip RevPAR in May accelerated to +11% (from +8% in April), while visitation grew 5% YoY (-1% vs 2019). The non-gaming results are consistent with what we have been hearing from operators on booking trend strength for the remainder of the year and is one of the key reasons for our bullish view on Vegas generally,” concludes Beynon.
