Wynn Resorts Limited (NASDAQ: WYNN) now has its gaming revenues and room rates in the United States significantly above the pre-pandemic numbers. Still, Kynikos Associates’ Jim Chanos warns, “the stock is not cheapâ€.
Chanos’ ‘sell’ case for Wynn Resorts
On CNBC’s “Halftime Reportâ€, Chanos said his reasons for short selling Wynn were unrelated to issues in Macau.
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Our problem with the Wynn story is that value investors keep basically claiming the stock is cheap, we don’t think it’s cheap. This is not a call on Macau; although I think Macau is problematic.
According to the American investment manager, Wynn is unlikely to earn money on a per share basis in the coming year and will make close to $2.5 a share in 2023 versus a little over $2.0 it was already earning before the pandemic in 2019.
So, at $80, it’s not a cheap stock. I’m not looking for a recession to be short Wynn.
Chanos’ fair price for the stock
Chanos also noted that the current stock price translates to an enterprise value of about $14 billion for Wynn Resorts, with a 72% equity stake in Wynn Macau worth $3.0 billion. He added:
The U.S. operations are being valued at about $11 billion. Even with EBITDA of more than $700 million for the U.S. operations, it’s still at 15-16 times that number. That’s not cheap for a land-based casino.
In comparison, Bloomberg’s at $675 million. Earlier this year in September, when Macau authorities announced tighter regulations for the gambling industry, Chanos said the stock should be trading in the $40s.
Shares of the casino company are down more than 40% from their year-to-date high of $140 in mid-March.
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