Analyst: Take Profits on This Casino Stock

Options traders have been leaning bearishly toward battered WYNN stock

Emma Duncan
Feb 9, 2018 at 10:40 AM
facebook twitter linkedin


Casino stocks Wynn Resorts, Ltd (NASDAQ:WYNN) and Penn National Gaming, Inc (NASDAQ:PENN) were targeted by analysts this morning, with both securities trading lower, at last check. Below, we will take a look at today's analyst notes, and how WYNN and PENN stocks have been faring on the charts of late.

Analyst: Take Profits on WYNN

Wynn Resorts stock gapped lower in late January, backing down from three-year highs amid sexual misconduct allegations surrounding Steve Wynn. The shares earlier this week attempted to stage a rebound after Mr. Wynn stepped down as CEO, but the shares were contained by the $180 level. Today, WYNN stock is down 1.6% at $166.41, after Morgan Stanley downgraded the resort and casino shares to "equal weight" from "overweight." 

"After significant outperformance in the past year, we suggest taking profits on WYNN," the analyst wrote. "In addition, following recent events leading to the resignation of Steve Wynn, there is greater fundamental/execution risk, as well as new regulatory risk." Wynn Resorts stock could be at risk of additional downgrades, as the majority of the 14 brokerage following the stock carry "buy" or better ratings.

In the options pits, sentiment has grown increasingly bearish in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows WYNN with a 10-day put/call volume ratio of 0.85, ranking in the 89th percentile of its annual range, suggesting puts have been bought over calls at a faster-than-usual clip.

PENN Tests Moving Average After Earnings

Shares of PENN have reversed early gains to trade 0.6% lower at $26.94. The stock yesterday sank to a year-to-date low after Penn National Gaming reported earnings, and analysts today continue to chime in.  The casino stock has been dealt no fewer than four price-target cuts, with the most notable coming from Morgan Stanley to $31 from $33.

Even with the recent pullback, PENN has had a decent year, picking up 91% over the past 12 months, and peaking at a record high of $33.30 on Jan. 22. Since then, however, the gaming stock has dropped 17%, and is now testing support atop its 120-day moving average.

Short interest grew 8.7% during the past reporting period, and now accounts for over 10% of the stock's total available float. At Penn National stock's average daily trading volume, it would take two weeks for the shorts to buy back their bearish bets.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners