Wynn Stock Can Double Over Five Years, Could Lure Buyer, Says Baron Capital
Although Wynn Resorts (NASDAQ: WYNN) shares saw a remarkable 44.5% return in the last year, some investors think the company could see even more growth in the future, which might benefit patient market participants.
According to Barron Capital's second-quarter commentary for the Baron Discovery Fund, the company started investing in Wynn stock early in the April–June timeframe while the shares were lagging due to tariff concerns. Concerns that China would retaliate against US trade taxes by potentially depriving US corporations of Macau licenses caused Wynn and Las Vegas Sands (NYSE: LVS), two US-based operators who operate a combined seven Macau integrated resorts, to see a decline in stock prices in March and early April.
That didn't occur, and investors who bought Wynn shares in early April, like Baron Capital, have benefited from hindsight.
"We took advantage of this weakness by building a position at what we believed were attractive prices,” notes the fund manager. “Our analysis showed that we were buying the stock at trough valuation multiples on both the Las Vegas and Macau properties and we were getting the upside from the currently under construction Al Marjan Island project (located in the UAE) for essentially free.”
When Wynn released its second-quarter earnings last week, the stock fell due to statistics showing that the VIP hold in Macau was weak. Better-than-expected outcomes at the operator's casino properties in Boston and the Las Vegas Strip were eclipsed by that.
Wynn is Unique and Could Attract Suitors
Although Wynn's stock has increased since the fund manager's original purchase, Baron notes that over the next five years, the shares might quadruple. "An acquirer may find Wynn's five-star resorts appealing," the asset manager continues.
Long-running rumors that Wynn is a potential takeover target haven't yet resulted in a deal. The main focus is on the potential for a private equity firm or Wynn's largest shareholder, Tilman Fertitta, to make a bid for the operator. Neither of those options was mentioned by Baron Capital.
The fund manager thinks that a lot of the bull thesis around Wynn stock can be put into practice right now, including the operator's capacity to differentiate itself from many of its competitors.
“We believe Wynn remains the most differentiated operator in the gaming sector with a premium offering that caters to high-end customers,” adds Baron. “This focus on premium service enables the company to command higher room rates and gaming revenue per visitor. This also helps to insulate the company during more challenging macroeconomic periods.”
Wynn Needs Greater Respect in the UAE
Baron Capital reiterated a well-known theme in presenting its bull case for Wynn stock: the operator should be given more credit for Wynn Al Marjan Island in the United Arab Emirates (UAE). The first regulated gaming establishment in Middle Eastern history, the integrated resort is expected to debut in early 2027.
Although gaming won't be the main attraction at the hotel, Wynn's efforts there are undoubtedly aided by the UAE's enormous local riches and its reputation as a top travel destination for wealthy foreign visitors. Wynn Al Marjan Island will have a multiyear monopoly because regulators there aren't anticipated to grant another casino license for at least a few years.
“The property should generate strong demand from Dubai residents, Ras Al Khaimah vacationers, and direct international visitors. Construction is well underway, and the resort is on pace to open in the first quarter of 2027,” observes Baron Capital. “We are bullish on the prospects for this integrated resort, and we think the stock is ascribing almost no value to the project currently.”
