It’s earnings-report time for Wynn Resorts and JP Morgan analyst, Joseph Greff, for one, is feeling blasé about the numbers. “Overall, we’d characterize the quarter as in line with investors’ recent expectations, and its earnings conference call outlook commentary as appropriately hinged on a resumption of travel that is predicated on a decline of COVID-19 infection rates and an acceleration of vaccination rates,” he wrote. Luckily for Wynn, its preferred Macao sector (premium mass-market) is outperforming the mass-market and VIP ones. While Sands China saw a 61% plunge in table-game wagering, Wynn had a victory of sorts by being down only 51%. Wagering volumes in Las Vegas were described as “impressive,” thanks to weekend play and California drive-in business. 4Q20 table game and slot handle were 72% and 85% of comparable 2019 levels, which bodes well for recovery. Still, Greff thought cash flow would be “stuck” at recent levels until Coronavirus vaccines are more widely promulgated.
The Morgan analyst shaved five bucks off his target price for WYNN, to $119/share, but encouraged buying on any downticks in the stock. Early-2021 cash flow projections were more optimistic for Wynncore (-4%) than Macao (-27%), but rosiest of all for Encore Boston Harbor, given a 16% boost. Internet gaming is slow to obtain traction, posting a $38 million negative return on investment. Looking over the horizon, Greff sees Wynncore gaining 5% more cash flow, bringing it to 93% of 2019 levels. Macao is dicier, only 83% of 2019 levels, led by slot play. VIP win is predicted to be 36% of 2019. At least Wynn Palace appears to have turned the corner, dwarfing Wynn Macau in EBITDA. Cash flow from all sources was $70 million for 4Q20, with Macao contributing $39.5 million and Vegas $21 million (on $173 million in revenue). Those numbers were above expectations and, going forward, “3Q/4Q events are hanging in (at least for now).” Whew.
Continue reading Wynn surprises few; Maryland stabilizes, Iowa impresses
Penn National Gaming reported 4Q20 earnings today and they were down 23% from last year. Many reasons were cited, including lower consumer spending, casino closures in Illinois, Michigan and Pennsylvania, and new restrictions in Ohio and Maine. Oh yes, and Covid-19. Fortunately for Penn, it had done a sufficiently good job of lowering expectations that Wall Street wasn’t fazed by the numbers. After the New Year ‘skinny stimulus,’ Penn is describing January business as “thus far encouraging,” with more foot traffic and longer stays. Sports betting is also providing a critical boost. JP Morgan analyst Joseph Greff wrote that Penn “is continuing to see encouraging growth in the younger demographic tiers of its database, and expects the roll-out of vaccinations will encourage more guests in all age segments of its database to return to land-based facilities soon.”
More than 23 million Americans are expected to bet legally or otherwise on the Super Bowl, according to the American Gaming Association, which predicts $4.3 billion in handle. 7.5 million punters will be doing their wagering online, 63% more than last year. The action leans heavily (56%) toward the Kansas City Chiefs—sorry, GOAT—with 12 million citizens betting against friends, as opposed to 1.5 million using retail sports bookies, down 61% from last year, before Covid-19 struck. Action with Lefty in the back alley will be patronized by nearly two million Americans, down 21%, a sign of progress. Speaking of progress, the AGA says, “34 percent of Americans remember seeing responsible gaming messaging in the past year, up five points from 2020. Super Bowl bettors were even more likely to see responsibility content, with 53 percent seeing responsible gaming messaging in the past year.” As AGA prexy Bill Miller puts it, “Responsible gaming is core to legal sports betting’s long-term success, and this is borne out by continued demand for consumer protections only available in the legal market.”
Greff elaborated that “vaccination hopes (which we share theoretically) allow for a more pronounced and sustainable consumer spend recovery starting in the 3Q21; we also know what marketing and staffing changes have been made—some of which are permanent—and have conviction that forward-year margins should be decently higher than pre-COVID-19 levels.” He added that gaming had been bolstered through a soft brick-and-mortar period by gains in sports betting and Internet play. He stuck with his price target for Station ($31/share) and added two bucks to his Boyd goal (to $54). The reasons have been well-rehearsed in this space, so we’ll skip them for now. He really likes Caesars, upping his target $6 to $89/share, noting that its William Hill purchase and i-gaming strategy are firming up nicely. “Additionally, CZR is attractively positioned for the return of the 55+ customer base to its casinos (we think this gains momentum along with vaccine distribution). During this period of COVID-19 related lockdowns/limited discretionary spend, many 55+ Caesars Rewards members have benefitted from increased savings and record-high home values and stock prices.”