VIP Strength Leads Deutsche Bank To Upgrade Wynn To Buy

Analysts at Deutsche Bank turned bullish on casino operator Wynn Resorts, Limited WYNN after a reconfiguration of the casino floor in Wynn Palace to attract more visitors is showing signs of success. The firm's Carlo Santarelli upgraded Wynn's stock rating from Hold to Buy with a price target boosted from $138 to $150.

The analyst's checks of the casino's floor reconfiguration should give investors sufficient confidence that recent poor trends could reverse. Specifically, a 5-percent sequential drop in mass table performance during the second quarter and a 22-percent sequential drop in property EBITDA caused the stock to pullback.

Given the increased confidence in Wynn's changes, the company should be able to report third quarter metrics that come in ahead of consensus estimates, the analyst continued. In fact, the hotel is likely running at close to full occupancy in the third quarter which adds to the bullish conviction.

"We believe the maturation of the Wynn Palace mass business will provide a meaningful boost to sentiment regarding the, to date, lower than expected return on invested capital at the property," Santarelli wrote (see his track record here).

The analyst's new bullish stance is also based on three other factors, including:

1. Ongoing strength in the VIP gaming segment which will boost the entire Macau region and gross gaming revenue.
2. Casino stocks as a whole will follow the improved Macau market GGR.
3. Wynn's accelerating discretionary free cash flow will attract investor attention.

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