Nevada Casinos Set New May Record; Wynn Resorts Eyeing Prosperity Surge

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Wednesday’s data corroborates that Nevada casinos set a new record for May, with gross gaming revenue (GGR) ticking in at a whopping $1.32 billion. Of this, the Las Vegas Strip contributed significantly with $742 million. A portion of this prosperity could be attributed to Wynn Resorts (NASDAQ: WYNN), perceived by at least one analyst as gaining from the robust spending of affluent consumers visiting the US casino hotspot.

A glittering McLaren Elva seen on the golf course of Wynn invokes the image of high-stakes and luxury. Wynn Resorts is envisioned as the leading investment prospect to seize the strength of high-end consumers venturing to the Strip. Analyst Chad Beynon of Macaquarie hinted at this in his note to clients earlier in the day. Even though May’s GGR increase on the Strip was mainly propelled by general table games and slot machines, Beynon recommended that investment bets are best placed in operators with opulent venues. Wynn fits aptly into this category with its flagship property and Encore, both being some of the most dazzling, highly-rated casino hotels globally.

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Beynon prefers to skew towards the higher end, where he believes the luxurious consumer is still willing to splash their cash. However, he notes that lower-income individuals may be straining under economic pressures. In this climate, he champions operators like Wynn that cater predominantly to a more affluent clientele. Beynon reaffirmed an “outperform” rating on Wynn and extended a $128 price target, anticipating an upside of 43% from its current closing.

For investors eager to maximize potential returns from the high-rolling customers frequenting the Strip, Wynn seems the most judicious choice, with its singular focus on this demographic. All of Wynn’s Las Vegas venues are high-end, meaning its portfolio is unblemished by mid-tier establishments, unlike competitors such as Caesars Entertainment (NASDAQ: CZR) and MGM Resorts International (NYSE: MGM). Similarly, Venetian is managed by private equity firm Apollo Global Management (NYSE: APO), rendering it an insignificant element of a more considerable investment portfolio. Likewise, Fontainebleau Las Vegas and Resorts World Las Vegas are under private ownership or part of vast conglomerates.

In essence, Wynn brandishes unmatched prowess in drawing in and profiting from wealthy patrons. It holds potential to further solidify this status over time, considering a prospective addition of a third hotel tower on the Strip.

The company’s potential to prolong its reign amidst high-end visitors to the Strip can be attributed to its commendable non-gaming facilities. Be it lavish guestrooms, gourmet restaurants, sought-after shows, or the finest wellness centers in Las Vegas – Wynn excels in them all. These features are enticing for future visitors and investors, particularly when Strip’s revenue per available room (RevPar) is robust.

According to Beynon, “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 align with what we’ve heard from operators on booking trend fortitude for the rest of the year and is a crucial reason for our positive outlook on Vegas overall.”