Wynn Resort's Immediate Future Not Looking Good

Despite the ongoing U.S. trade war with China, Macau casino stocks held up relatively well so in 2019. However, Andrew Lo Kai Bong, executive director at Suncity Group Holdings, said Macau gross gaming revenue would fall in the second half of 2019 year as trade war uncertainty and slowing growth in China weighed on gambling.

Wynn has a huge presence in Macau and their Macau revenue makes up about 90% of total revenue for the company. Wynn owns three Macao properties: Wynn Macao, Encore at Wynn Macao, and Wynn Palace. Little did they know, the trade war was just the appetizer as the entrée was on its way.

The coronavirus outbreak has infected at least 20,000 worldwide and killed more than 400, including two people in Hong Kong. It’s important to note, Hong Kong is about 40 miles away from Macau.

In January, Macau became nearly a ghost town when it should have been the busiest time of the year due to the Chinese New Year. As a result, gambling revenue in Macau dropped 11% in January year-on-year.

In early February, COVID-19 had infected at least 20,000 worldwide and killed more than 400, including two people in Hong Kong. It’s important to note, Hong Kong is about 40 miles away from Macau. Macau is a region on the south coast of China, across the Pearl River Delta from Hong Kong. Macau is called the Las Vegas of Asia and gets about 50% of its revenue from gambling. Wynn sold off hard, but has since rallied into the Summer months as optimism surrounding COVID-19 increased.

Not its time for the dessert.

Fears China is broadening a crackdown on offshore gambling has sparked a rush to withdraw billions of dollars from the world’s biggest gambling hub Macau, threatening a recovery in the coronavirus-stricken economy, executives say.

An unprecedented stampede to withdraw money from junkets – companies which lure high rollers to gamble – started in July after Beijing identified the cross-border flow of funds for gambling as a national security risk.

Worryingly, the customer withdrawals have spilled into the broader casino industry, leading to a cash crunch in Macau's VIP sector at a time the Chinese territory is struggling to recover from COVID-19 restrictions which has sent tourist numbers and gambling revenues plummeting.

Goldman Sachs analyst Stephen Grambling downgraded Wynn Resorts from ‘Buy’ to ‘Neutral’ earlier this month, removing the stock from their ‘Conviction List’ and dropping the price target to $95. But many are Wall Street are stating that Wynn could retest it March lows of $35 and according to the monthly chart, it's quite possible as the real demand is at the monthly chart at $30.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted Using LeoFinance