Why This Casino Stock May Not Be Such a Gamble

Wynn stock is down over 40% year-over-year

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Wynn Resorts, Limited (NASDAQ:WYNN) is down 1.7% to trade at $78.26 at last check, though there is no apparent reason for today's price action. Back in September, the security came under pressure after China announced a regulatory overhaul as the Macau government planned to analyze how gambling concessions were reviewed. Later in December, after a 45-day public gaming consultation seemingly brought no additional regulations that could put a dent in profits, the impacted casino stocks bounced back.

The security is today running into a familiar ceiling at the $80 level, after bouncing off a March 15, annual low of $66.33. The 20-day moving average is still pressuring shares lower as well, and year-over-year Wynn Resorts stock maintains a hefty 42.4% deficit. 

WYNN 20 Day

Analysts are mostly pessimistic towards WYNN, with six of the nine in question calling it a tepid "hold" or worse. Plus, bears are firmly in control, with the 6.07 million shares sold short making up 5.8% of the stock's available float.

At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day put/call volume ratio of 0.65 that sits higher than 95% of readings from the past 12 months. This indicates that while calls are still outnumbering puts on an overall basis, the latter have been more popular during the past two weeks.  

Wynn Resorts stock offers very little security or consistency from a fundamental point of view. WYNN currently holds $12.04 billion in total debt, and only $2.53 billion in cash on its balance sheet. The hotel and casino concern also reported back-to-back years of top- and bottom-line declines for 2019 and 2020, with revenues decreasing 68% while its net income fell by $2.19 billion for 2020.

However, Wynn Resorts stock trades at a forward price-earnings ratio of 11.39, as well as a price-sales ratio of 2.19, indicating a relatively good valuation. WYNN also reported an 80% increase in revenues and a $1.3 billion increase in net income for 2021. What's more, the casino name is estimated to grow its revenues by 29.5%, and increase its earnings from -$1.03 to $3.59 in 2022.

Overall, Wynn stock offers a decent opportunity as a short-term recovery play, despite its  fundamentals providing an elevated level of risk.

 

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