UBS has downgraded Wynn Resorts from Buy to Neutral, as it was already nearing its target stock price, and will likely face difficulty in decreasing labor costs.
“We are downgrading Wynn to Neutral from Buy, as we believe the stock at these higher levels reflects improving trends in Macau, decent opening for Wynn Palace and potential for positive GGR comps in Macau by 16Q4.” said analyst Robin Farley in a note on Wednesday.
“We had tagged more cautious outlook for Macau and ests revisions for Wynn here, now expecting Macau gross gaming revenue to turn positive in Q4’16, implying a slower rate of recovery in GGR. With the stock now reflecting a decent opening for Wynn Palace on Cotai, we believe WYNN now has less favorable risk/return with the stock at these higher levels,” he continued.
The UBS analyst also added that they believe a good opening of Wynn Palace may be factored into the stock, and thus there may not be additional upside in the near term. Labor may also be an issue – where the property “will not be able to open with a more typical strategy of overstaffing and then shedding excess labor.”
Regarding tables, the UBS analysts estimates Wynn Palace could get around 200-250 new tables while shifting 150 existing tables, allowing the property to open with 400 tables.