Worried About Macau? Don't Be, It's Finally Time To Buy

UBS’ Robin M. Farley upgraded the rating for Wynn Resorts, Limited WYNN from Neutral to Buy, while raising the price target from $73 to $95.

Although gaming stocks with Macau exposure had gained 20 percent year-to-date, their risk reward profile had improved, given stabilization in Gross Gaming Revenues, or GGR, in Macau, analyst Robin Farley mentioned.

There has been a sequential stabilization in mass revenues for three quarter and in VIP revenues over two quarters. The analyst expects 2016 GGR revenues to grow 2 percent, with overall positive y/y growth beginning in 2Q-3Q.

“March may come in with a decline of high single digits to low to mid-teens, perhaps down -8-13%, a little more down than the -12% decline in Jan-Feb but an improvement from Q4 declines of -27%,” Farley added.

Other Risk Mitigating Factors

Farley identified certain other risk mitigating factors as:

• The risk of a tightened smoking bank lessening in recent months
• Relaxation of transit visa regulations resulting in improved visitor growth
• Better clarity about the delay of new projects
• Junked system stabilization
• Subsiding of anti-corruption campaign
• Improving property market in China

The resolution of or more clarity into these issues is expected to reduce the outlook uncertainty for Macau and for Wynn, the analyst commented.