Wynn is a company, much like my previous post (about Target), where it has peaked my interest.
So as to be transparent, I have 200 shares at an average price of about $105 per share. (My core position, of course, is the SPY, of which, I have been in the position since 2007 as additional transparency).
So, with the aforementioned in mind, why has Wynn peaked my interest? Here is my thought process from a fundamental perspective:
- Wynn's revenue, in FY 2023, effectively, returned to the revenue they had pre-pandemic, which is about $6.6 billion. (It was a long journey from 2019 to today, however, they have gotten back here and, based on 2023 FY numbers, and 2024 preliminary guidance, the company looks set to report, conservatively, earnings in the $7.50-$8.00 per share range across their portfolio of casinos).
- In taking a look at the balance sheet, the company has long-term debt of about $11.00 billion versus cash on hand of about $3.5 billion. Secondarily, the company reported FY 2023 EPS of $6.49 per share / $729,994,000.00 in net income (post tax).
With those fundamentals in mind, the company (as of this writing) sits at $99.00 (approximately) per share and, with the market being forward looking, and working off of the $7.50 per share in EPS for 2024, that would put the current PE at about 13.3 and, with the S&P 500 trading at 20-21x earnings (depending on which 2024 EPS estimate you use) it is reasonable to think that a fair value PE for this company, which is growing faster than the S&P earnings should, at a minimum, be priced at a fair value PE of 18-20x.
Figuring that the company meets the EPS estimates in FY 2024 of $7.50, at a PE of 18, that would put fair value of the stock at $135.00 per share (which is about 36% upside from here).
Essentially, my argument is, much like Targets, that 1. the company is fundamentally undervalued and 2. Working under the assumption that the economy stays strong AND China gets their act together (there are rumors of the CCP working to stimulate their economy — take from it what you will) then that could mean even larger upside potential for Wynn's stock, across the board.
The obvious caveat is a black swan event OR an economy that slips into recession, however, I see no data, as of this writing, that would indicate those are on the horizon AND, with the Fed no longer raising rates, with cuts, perhaps, on the horizon, then that means more money in consumer pockets.
So, that leads me to this point that, in general terms, if the market is going to be broadening out, which it appears to be doing then, my belief is that Wynn starts to trend upwards and, in my view, over the next 3-6 months, I think it is reasonable to expect at least a 10% return from here with a best case scenario being similar to that of Target (at least in the pre-market) where the stock reports a solid quarter, is seemingly getting their act together and outperforms.
Curious to get the communities feedback on this one as, to my eye, it seems like a quality investment at a reasonable price.
