Jim Chanos explains why he’s short Wynn Resorts

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 cheap”.

Chanos’ ‘sell’ case for Wynn Resorts

On CNBC’s “Halftime Report”, 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.