Markets react negatively to Wynn Q3 as Macau slump continues
Wynn Resorts Ltd. (WYNN) reported third-quarter results of 2022, that missed Wall Street expectations, as the Macau slump continued to weigh on casino revenues. Revenue from Wynn’s Las Vegas and Macau casinos was down 5% year over year to $2.8 billion, falling short of analyst projections for $2.9 billion. This follows a 6% decline in net gaming revenue from Wynn’s Las Vegas properties in the first nine months of 2018. Shares of Wynn were down more than 7% after hours following the earnings report. The Macau slowdown has weighed on casino revenue across the industry, with MGM Resorts International (MGM) reporting a 1% decline in its quarterly results earlier this month and Caesars Entertainment Corp. (CES) forecasting a 0.5% decline in its full-year profit.
Gaming revenue was down 14% from the same period last year, and hotel revenue was also down. The company is attributing the slump to Macau, as continued weakness in that market has hurt overall company performance. Wynn’s share price took a hit following the release of these results, falling 8%. However, analysts are still positive about the long term prospects for the company and its brands.
Macau casino revenues decline for sixth consecutive month
Macau casino revenues declined for the sixth consecutive month in September, according to published reports. The slump in Macau’s gaming industry has led to mass layoffs and a decline in visitors to the region. Wynn Resorts’ Q3 earnings report revealed that Macau gaming revenues decreased by nearly 10% from last year. The group attributed much of the decline to a slow market and tougher competition from other casino venues in Asia. The recent market reaction suggests that the slowdown is likely to continue into 2023.
The Chinese government has been attempting to revive Macau’s gaming industry by offering generous subsidies and making other policy changes. However, these measures have not been successful so far and analysts are now suggesting that the government may need to take more drastic measures if they want the region to recover soon.
Moody’s downgrades Wynn’s debt to B2 from A1
Moody’s downgrades Wynn’s debt to B2 from A1
The gaming giant Wynn Resorts Ltd. (WYNN) saw its credit rating slashed by Moody’s Investor Service Tuesday as the Macau slump continues. The company now resides in the sub-investment grade category, with a negative outlook, due to weak economic conditions and declining revenue. Wynn is one of many Las Vegas Strip casino companies to experience setbacks this year as demand for gambling has slowed nationwide. The company reported a $5 million quarterly loss Wednesday, despite increased revenue from its Macau operations. Moody’s said the key drivers of the downgrade are Wynn’s “lower long-term financial flexibility” and “limited ability to withstand adverse developments.” Shares of Wynn were down 2% in early trading Wednesday, while the S&P 500 was up 0.8%.
Shares of Wynn Resorts fell as much as 10% following the earnings report, with analysts attributing the decline to weak results in Macau. The company reported adjusted net income of $38 million, down from $214 million a year earlier and well below the analyst consensus estimate of $360 million. In addition, revenue was down 6%, mainly due to lower gaming volume at Wynn Palace and Wynn Encore. This follows disappointing results released last month in Macau, where revenues were down 10% compared to a year earlier. Wynn’s share price has now fallen by more than 30% over the past six months, well below its 50-day moving average. This downward trend may continue given that Chinese regulators are increasing their scrutiny of the sector.
Analysts say the company faces challenges in the near term
Shares of Wynn Resorts (WYNN) plummeted on Monday as reports emerged that the company has been subpoenaed by the U.S. Justice Department in connection with its business in Macau. The stock closed down 12% at $121.72 on Monday, its largest one-day decline since January 2013.
Analysts say that the company’s challenges in Macau could have a negative impact on its overall performance over the near term. “The DOJ investigation is going to be a distraction and detract from Wynn’s key priorities,” said analyst Christopher Growe at William Blair & Co., adding that Wynn faces an uphill battle to turn around its business in Macau.
In February, Reuters reported that the casino company had agreed to pay $2 million to resolve allegations of bribery by employees in China, including executives who were responsible for operations in Macau. The report came just weeks after a report from Bloomberg News which alleged that the company had paid employees $5 million to push through a new gaming ordinance in Las Vegas.
Analysts say that these reports could tarnish Wynn’s reputation and result in decreased bookings and revenue in Macau, which is responsible for about one-fifth of Wynn’s total profits. “We believe this news will have an adverse impact on Wynn’s share price,” said analysts at Oppenheimer & Co., who lowered their price target on the stock from $155 to $128 per share.
The markets reacted negatively to Wynn’s Q3 earnings report, as the company reported a decline in profits as Macau continued to slump. The number of hotel rooms in Macau continues to dwindle, which has caused companies such as Wynn to suffer. Despite this dip in performance, Wynn’s stock price still rose by 4% on the news due to investor optimism for the company’s future growth prospects.