The shares of Wynn Resorts (NASDAQ: WYNN) have observed a 30% decline since March 2021 as multiple infectious waves of pandemic and stringent containment measures prolonged the expectations of a complete recovery in Macau. As Wynn’s Macau operations had a 70% contribution of revenues and earnings before the pandemic, tourist visitations remain key to a pullback in Wynn stock. Moreover, the company has been tightening its grip in the U.S. sports betting and iGaming market with its application WynnBet. Trefis compares Wynn Resorts’ upside post Covid in an interactive dashboard analysis. (related: Penn National Gaming Stock: Should You Buy The Dip?)
Timeline of 2020 Crisis So Far:
- 12/12/2019: Coronavirus cases first reported in China
- 1/31/2020: WHO declares a global health emergency.
- 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
- 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
- Since 3/24/2020: S&P 500 recovers 94% from the lows seen on Mar 23, 2020, with the Fed’s multi-billion dollar stimulus package keeping the economy afloat during the prolonged lockdown and the vaccination drive allowing things to gradually return to near-normal conditions despite several waves of Covid infections.
In contrast, here’s how WYNN and the broader market performed during the 2007/2008 crisis.
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)
Wynn Resorts vs S&P 500 Performance Over 2007-08 Financial Crisis
WYNN stock declined from levels of around $164 in September 2007 (pre-crisis peak) to levels of around $21 in March 2009 (as the markets bottomed out), implying WYNN stock lost 87% from its approximate pre-crisis peak. It recovered post the 2008 crisis to levels of about $58 in early 2010 – rising by 178% between March 2009 and January 2010. In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.
Will recovering travel demand assist Wynn Resorts’ fundamentals?
Wynn Resorts’ revenues observed a 9% growth from $6 billion in 2017 to $6.6 billion in 2019 before the pandemic, driven by the Macau operations. The operating margins remained in mid-single-digits despite pre-opening expenses arising from new property openings. The company’s revenues declined by 68% and 43% in 2020 and 2021 from pre-pandemic levels, respectively. However, the adjusted property EBIDTA turned positive from -$324 million in 2020 to $149 million in 2021, supported by effective cost control measures. With the decline in new coronavirus infections, there is a strong likelihood that Macau will observe a recovery in 2022.
Phases of Covid-19 crisis:
- Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020: Fed stimulus suppresses near-term survival anxiety
- May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
- Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment
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