Bank of America Merrill Lynch downgraded Wynn Resorts, Limited WYNN to Neutral and reduced its price target from $210 to $195 in a report issued Tuesday.
Analysts led by Shaun C. Kelley believed that “Macau’s challenges are likely to last longer than we previously anticipated” including a disappointing Golden Week, declines in VIP revenue and disruptions from the smoking ban.
According to the report “new supply is the other challenge in Macau in 2015-2016. Near-term we think this is likely to keep the group range-bound as: 1) a weaker demand environment will keep the Cotai projects as a “show-me” story, 2) Macau properties have historically relied on the VIP business to ramp up operations quickly and 3) there remains risk to project timelines and budgets as is always the case with large-scale construction projects."
Kelly also applied Macau’s challenges to Las Vegas Sands Corp. LVS in the report.
The report concluded that “there is enough price risk (15-20 percent+) from current levels to put us on the sidelines before we feel comfortable arguing for valuation support.”
Wynn Resorts, Limited recently traded at $171.92, down 0.88 percent.
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