Wynn stock has been trading at $96 per share, which is 31% below its pre-inflation shock high of $140 in March 2021. The decline was primarily driven by the impact of Covid-19 restrictions on the Macau operations, leading to a collapse in business in 2021 and 2022. However, there has been a significant recovery in Macau over the past year, with tourist arrivals rebounding strongly and market-wide gaming revenue reaching 105% of 2019 levels. Wynn is gaining market share in Macau, particularly in the premium mass market and higher VIP rolling chip volumes, indicating pent-up demand in the region.
Despite the recent decline, Wynn stock has shown some volatility in its returns over the past three years, with underperformance compared to the S&P 500 index in 2021 and 2023. Beating the S&P 500 has been challenging for individual stocks in recent years, even for heavyweights in the Consumer Discretionary sector. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, suggesting a more stable return with less risk. The uncertain macroeconomic environment, characterized by high oil prices and elevated interest rates, poses a challenge for Wynn’s performance in the near future.
To reach its pre-inflation shock high of $140 per share, Wynn stock would need to gain approximately 45% from its current level of $96. While there is potential for gains, concerns about the global economy and a potential slowdown in consumer spending could limit the upside for the company in the near term. A detailed analysis of Wynn’s performance post-inflation shock suggests that the stock may face challenges similar to those seen in 2021 and 2023, impacting its ability to outperform the S&P 500. The comparison to its performance during the 2008 recession provides insights into potential trends.
The timeline of the inflation shock from 2020 to 2022 highlights the various factors that led to high inflation rates, impacting the global economy and financial markets. The Federal Reserve’s efforts to control inflation have helped improve market sentiment, supporting potential gains for Wynn stock once concerns about a potential recession are alleviated. Wynn’s fundamentals over recent years reflect the impact of the pandemic on its revenues, with a recovery in the U.S. offsetting weakness in Macau. Although the company remained loss-making between 2020 and 2022, it posted a profit of over $730 million in 2023.
In conclusion, Wynn stock has the potential for gains once market sentiment improves and fears of a recession are addressed. With the challenges posed by the current macroeconomic environment, investors will need to carefully monitor the performance of Wynn and consider the company’s fundamentals and potential for recovery. The comparison to historical trends and market conditions can provide valuable insights into the stock’s future performance and its ability to outperform the broader market.
