Wynn stock is currently trading at $75 per share, about 46% below its peak of $138 before the inflation shock on March 17, 2021. The stock was impacted by operations in Macau, which largely collapsed in 2021 and 2022 due to strict Covid-19 restrictions that curbed the flow of tourists to the region. Now, the situation in Macau’s gambling market has recovered significantly. Tourist arrivals in Macau have rebounded sharply, and Wynn and other casino players are seeing pent-up demand. In the first half of 2024, visitor arrivals increased 43.6% year-on-year to 16.7 million. In addition, expenses have also increased. In the second quarter of 2024, Wynn’s operating revenue in Macau was $1.73 billion, up about 8.5% year-on-year. The occupancy rate of the company’s hotels in Macau was also exceptionally good, reaching 98.5% in the last quarter.

Looking at a slightly longer time frame, WYNN stock has suffered a sharp 30% decline from $110 in early January 2021 to around $75 now, while the S&P 500 has seen a roughly 40% increase over that roughly 3-year period. However, WYNN stock’s decline has been far from consistent. The stock’s returns were -25% in 2021, -3% in 2022, and 11% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 24% in 2023 – suggesting that WYNN lagged behind the S&P in 2021 and 2023.

Actually, consistently beats the S&P 500 – for better or for worse – has been difficult for individual stocks in recent years; for heavyweights in the consumer discretionary sector such as AMZN, TSLA and HD and even for megacap stars GOOG, MSFT and AAPL. In contrast, the Trefis High Quality Portfolio with a collection of 30 stocks outperformed the S&P 500 every year in the same period. Why is that? As a group, the HQ portfolio stocks delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as shown by the HQ portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could WYNN experience a similar situation to 2021 and 2023 and perform worse than the S&P in the next 12 months – or will there be a recovery?

A return to pre-inflation shock levels means Wynn stock will need to gain about 85% to recover from its current $75 to its pre-shock high of $138 per share. While the stock could recover to that level, we currently estimate Wynn’s Rating to about $105 per share, about 40% above the current market price. While we believe Wynn could make a profit, we think concerns about the global economy and a potential slowdown in consumer spending could limit the company’s upside potential in the near term. In addition, Wynn also experienced a slight decline in its market share in Macau last quarter. Our detailed analysis of Wynn uptrend after inflation shock captures the trends of the company’s stock during the turbulent market conditions in 2022. It compares these trends to the stock’s performance during the 2008 recession.

Inflation shock 2022

Timeline of the inflation shock so far:

• 2020 – early 2021: An increase in the money supply to cushion the impact of lockdowns led to high demand for goods; manufacturers were unable to meet this demand.
• Early 2021: Supply bottlenecks and labor shortages due to the coronavirus pandemic continue to impact supplies
• April 2021: Inflation rates exceed 4% and rise rapidly
• Early 2022: Energy and food prices rise due to the Russian invasion of Ukraine. The Fed begins its rate hike process
• June 2022: Inflation peaks at 9%, the highest in 40 years. The S&P 500 index falls more than 20% from its peak.
• July – September 2022: The Fed raises interest rates aggressively – leading to an initial recovery in the S&P 500, followed by another sharp decline
• October 2022: The Fed continues the rate hike process; improved market sentiment helps the S&P 500 to offset some of its losses.
• Since August 2023: The Fed has left interest rates unchanged to allay fears of a recession, and there is a possibility of a rate cut in 2024.

In contrast, here’s how WYNN stock and the broader market performed during the 2007/2008 crisis.

Timeline of the crisis 2007–2008

• 1.10.2007: Approximate pre-crisis high in the S&P 500 index
• 01.09.2008 – 01.10.2008: Accelerated market decline due to Lehman’s bankruptcy filing (15.09.2008)
• 01.03.2009: Approximate bottoming of the S&P 500 Index
• 31.12.2009: First recovery to the level before the accelerated decline (around 1.9.2008)

Performance of Wynn Stock and S&P 500 during the 2007-08 crisis

WYNN stock fell from nearly $164 in October 2007 to $21 in March 2009 (when markets bottomed out), meaning the stock lost over 85% of its value in the fall. However, the stock recovered strongly and was trading above $58 in early 2010, an increase of about 178%. The S&P 500 Index saw a 51% decline, falling from 1,540 in September 2007 to 757 in March 2009. It then recovered 48% between March 2009 and January 2010, reaching 1,124.

Wynn fundamentals of the last years

Wynn’s revenue fell from around $6.6 billion in 2019 to about $2.10 billion in 2020 as the spread of Covid-19 impacted gaming and hospitality revenues. The figure rebounded to $3.8 billion in 2021 and was at $3.75 billion in 2022 as a recovery in the U.S. was partially offset by weakness in Macau. Revenue rose to $6.5 billion in 2023. While the company posted a profit of over $300 million in 2019, it remained loss-making between 2020 and 2022 as the pandemic weighed on its business. Net income was about $730 million in 2023.

Diploma

The Fed’s efforts to curb runaway inflation are improving market sentiment, and Wynn stock has upside potential once concerns about a possible recession are dispelled.

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