Wynn Resorts

Wynn posted second-quarter revenue growth of 7% to $1.86 billion, driven by a 14% rise in Macao and a 1% lift in Las Vegas. Total adjusted EBITDAR margin contracted 120 basis points to 30.6%, primarily reflecting planned investments in Las Vegas tied to gaming and restaurant openings last quarter.

Why it matters: Prioritizing brand investments over near-term profits should help maintain Wynn's premium customer position in Las Vegas, amid event calendar tailwinds. The firm is also expanding and renovating its Macao operations, which we posit will strengthen premium customer share. We see Las Vegas benefiting from major sporting events with more Athletics' MLB games, the 2027 NCAA national football championship, the 2028 Men's NCAA Final Four basketball, and 2029 Super Bowl. A potential NBA expansion team could also serve as a long-term growth driver. Despite contributing to a 9% increase in operating expenses in Macao, a new premium gaming space drove a 5.5% increase in mass-market wagering, signaling investments are resonating with consumers. Meanwhile, we see the Enclave room expansion at Wynn Palace Cotai, opening in 2029, having about a 17% rate of return.

The bottom line: We don't plan any material change to our $118 fair value estimate for narrow-moat Wynn as higher Macao and Las Vegas revenue is offset by the delay of Wynn Al Marjan Island opening in the United Arab Emirates. Shares popped by a mid-single-digit percentage but still offer a modest discount. Al Marjan is expected to open in September 2027 (versus early 2027) but will cost $600 million more, partly attributable to the impact of the Middle East war on materials and shipping. With geopolitical stabilization, we expect tourism to resume, supporting top-line growth in the region. Even against these challenges, we maintain our High Morningstar Uncertainty Rating for Wynn and Standard Morningstar Capital Allocation Rating, supported by the firm's stable competitive standing in Macao and Las Vegas.

After reviewing Wynn's second-quarter results, we have maintained our fair value estimate of $118 per share. Our valuation implies a 10 times 2027 enterprise value/EBITDA multiple.

Wynn posted second-quarter revenue growth of 7% to $1.86 billion, driven by a 14% rise in Macao and a 1% lift in Las Vegas. Total adjusted EBITDAR margin contracted 120 basis points to 30.6%, primarily reflecting deliberate Vegas investments tied to gaming and restaurant openings last quarter.

We expect Wynn's Vegas business to return to sales growth in 2026, aided by easier comparisons and a more favorable calendar. Meanwhile, we think Wynn's exposure to a premium customer in Macao will allow to keep pace with our forecast 5% industry growth this year. We expect Wynn's Macao sales to average 5% growth during 2026-35. Given the growth we see from expanding mass gambling and nongaming activity, we project Macao's EBITDA margins to expand to 33% in 2035 from 29% in 2025. We model Las Vegas sales to increase 2%-3% during 2026-35 in line with long-term GDP growth, with EBITDA margins in the high-30s over that same time. We expect Wynn's Boston Encore property to see 2% average annual revenue growth during 2025-35, with EBITDA margins in the high-20s. Finally, we estimate Wynn's United Arab Emirates property 2030 revenue and EBITDAM of $1.7 billion and $632 million, respectively.

We think Wynn Resorts has a Morningstar Economic Moat Rating of narrow, driven by its established brand and gaming concession intangible assets in Macao, where government regulation creates meaningful barriers of entry for new competition. We don't expect the company's advantageous position in Macao to be altered by structural changes emanating from increased government regulation over the long term. Wynn is synonymous with high quality, with its hotels, restaurants, and amenities often receiving Forbes 5-star awards. Its past successes with Bellagio and Mirage in Las Vegas aided the company in winning a gaming license in Macao. Further, this success in Macao helped Wynn win the only gaming concession awarded in the Boston market, where the company opened a resort in June 2019. This continued execution of building and operating some of the best integrated resorts in the world positions Wynn Resorts to win concessions in future gaming markets. In this vein, the company is set to manage a integrated resort in the United Arab Emirates, which we expect to open in 2027.

In Macao (49% of 2025 EBITDA), there are only six gaming licenses, which the Chinese government renewed at the end of 2022 for 10 years through 2032. Given that Wynn and other operators have invested meaningful capital (Wynn’s Macao capital expenditures totaled $5.2 billion during 2013-25) and have helped to develop the Macao economy, we were not surprised by the renewal. We were also not surprised by the government's decision to refrain from extending any incremental licenses, given the limited land available to develop and the government's seeming preference to control growth of the region. As a result, we see a continued controlled limited supply of competition for the Macao market over the next decade. The Macao gaming industry also has an advantageous demand setup. Demand for Macao's gaming market is lifted by China's increasing income prosperity as well as the region's improving infrastructure, which will enhance accessibility for visitors. As a result of this solid supply and demand relationship, we believe the Macao region holds a narrow moat.

The Wynn Macau resort is located on the Macao peninsula and not on the Cotai Strip, where the mix of traffic has migrated. That said, Wynn has renovated rooms and the gaming floor space at its peninsula property during the last few years, which has helped the facility maintain market share. Further, Wynn's Cotai Palace property opened in August 2016 and increased its room share to 9% from 6% among the six concessionaires, also helping the company maintain a solid competitive position in the overall Macao marketplace. The company will build upon its Cotai Palace property by increasing its room count 25% with the addition of a tower with 432 suites opening in 2029.

Wynn is set to open the one and only land-based gaming resort in the UAE region of Ras Al Khaimah in 2027. We expect strong demand for the property, given the government aspires to increase overnight stays to 9.6 million in 2030, up from 4.3 million in 2023. As a result, we forecast a rate of return of about a high-teen percentage for the property by the end of this decade.

Conversely, we see the US region (51% of 2025 EBITDA) as not having a moat due to lower regulatory barriers, which has led to about 1,000 commercial and tribal casinos in the US, resulting in high levels of competition and lower returns on invested capital. In fact, the region’s low return profile drove Wynn to pull back on prepandemic plans to develop 38 acres of vacant land in Vegas and instead focus on higher investment areas like Macao. Ultimately, we think Wynn could sell this undeveloped land for around $1 billion and allocate that capital toward debt repayments and international regions, which we would see as prudent. From a demand perspective, Vegas gaming revenue and visitation growth has averaged near US GDP growth the past 10-20 years. That said, the addition of professional sports and venue space for marquee concerts to the region stands to drive incremental demand. Still, the supply/demand dynamic in Las Vegas leads to low ROICs, supporting our view that the region lacks a competitive moat.

Wynn’s ROIC offers quantitative support of our narrow moat rating. We believe ROICs (including goodwill) will average 14% over the next five years, above the company's 9% cost of capital. Additionally, cost efficiencies in Vegas and mix shift to higher-margin premium mass gaming and nongaming in the Macao market frame our operating margin forecast of 19% in 2030 from about 13% in the prepandemic year of 2019.

Beyond low supply barriers in the US, government control in Macao prevents us from considering a wide economic moat. While an extremely unlikely scenario, the Chinese government could exercise its right to seize and take control of all gaming operations on the island, which would have a meaningful impact on Wynn’s economic profit outlook, and thus the durability of its return profile.

Wynn is positioned to participate in the long-term growth of Macao (49% of 2025 EBITDA) and has low-double-digit revenue share in the region and is developing a new tower with 432 suites, increasing rooms 25% at its Palace resort.

Wynn has a narrow economic moat, thanks to possessing one of just six licenses awarded to operate casinos in China.

The company is set to open the first integrated resort in the United Arab Emirates, which we expect to generate ROICs of about a high-teen percentage.

The Macao and Chinese governments are gradually moving the region toward a nongaming full resort destination site, as opposed to one of high-end VIP gaming, which could result in an outsize slowdown in growth for Wynn, given its higher-end exposure.

Wynn's VIP exposure in China makes the company more sensitive to economic conditions, interest rates, credit conditions, and the stock and housing markets than the less volatile mass market.

Ongoing government regulation could materially affect the company's demand.