An unwinding of pessimism could keep the wind at WYNN's back
Every day for the next two weeks, we're going to highlight one of Schaeffer's top 14 picks for 2021. Up next is a casino stock primed for post-pandemic life. To access the entirety of the 2021 report, click here.
While Wynn Resorts, Limited (NASDAQ:WYNN) has undoubtedly had a rough year – with shares still significantly below its 2020 highs – the stock seems to be on the road to recovery. The security has nearly tripled off its March trough, and has plenty of room to run as the economy recovers over the next year. In fact, the equity has been surprisingly resilient. WYNN quickly bounced back from an early November earnings miss, as positive vaccine news began to roll in, with the pandemic gloom and doom now seemingly priced in. Plus, from a more technical standpoint, former resistance at the $105 level is now looking like a potential area of support.
Short interest has gradually begun to build this year, with the 12.02 million shares sold short now sitting at five-year highs, and making up a solid 13% of WYNN’s available float. This creates the opportunity for a significant short squeeze, given all this pent-up pessimism could quickly unravel within the next year, as customers flock back to casinos and resorts.
This bearish mentality is shared by options traders. This is per Wynn’s SOIR ratio that stands higher than 89% of readings from the past 12 months, indicating short-term option traders have rarely been more put-biased. There’s some potential for future upgrades, too, which could help put even more wind at the security’s back. Of the 11 analysts in coverage, five consider WYNN a tepid "hold."
Bryan Sapp, CFA, is a Senior Market Strategist at Schaeffer's Investment Research, specializing in volatility, short-term equity trading, and macro analysis. Sapp, a more than 10-year veteran of the Schaeffer's research team, holds a B.S. in economics and an MBA with an entrepreneurship focus from the University of Louisville, and is a CFA Charterholder. Once a highly ranked poker player who amassed over $2 million in tournament winnings, Sapp has translated his skill for strategic plays into monster returns for Schaeffer’s swing trading services.