Is This Gamble Worth It?

Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As mentioned in my article, the casino industry tends to flourish when the economy is doing well and people have enough money to splurge so much that losing some won’t make a difference. Hence, expecting the industry players to shine during such an uncertain environment is quite a difficult thing to do. Therefore, casino companies such as Wynn Resorts (NASDAQ: WYNN) have had a tough time trying to lure people in its casino resorts, as well as meeting investors’ expectations.

Quarter In Brief…

Wynn posted mixed third quarter results. Its revenue was almost flat, since increasing revenue from Las Vegas operations offset the decline in revenue from the Macau operations. Slowdown in China has had an adverse effect on the casino’s footfall. Also, lower revenue from VIP table games led to poor performance in the Macau region. However, gambling business in Las Vegas experienced a wonderful performance. Also, the company’s revenue from non-casino operations, such as food and beverages, witnessed growth.

Performance as Against the Peers

Wynn has been going through a difficult phase, which was evident from its stock price performance in the last one year. Wynn’s return to its investors in comparison to its peers, Las Vegas Sands (NYSE: LVS) and MGM Resorts (NYSE: MGM), is depicted in the chart below:

<img src="http://media.ycharts.com/charts/4d95db742593ae71b530f9b2cf180268.png" />

WYNN data by YCharts

Wynn has been the worst performer of the three, with a stock price decline of 10.4%; whereas Las Vegas and MGM Resorts fell 2.1% and 8.1%, respectively. On the whole, all the players witnessed declines owing to the ongoing problems in the industry.

If we consider the revenue growth of the three players in the last 5 years, Wynn has registered the lowest growth as shown in the chart below:

<img src="http://media.ycharts.com/charts/8966fb8aacae30edcc20ac1e30884921.png" />

WYNN Revenue Annual YoY Growth data by YCharts

Clearly, Las Vegas Sands has been the leading player, with the highest revenue growth of 37.3% over the last 5 years. In fact, Las Vegas Sands has been doing really well with its new casino resorts in Macau, which is taking away Wynn’s market share.

However, Wynn is planning to open another resort in Macau to gain back its lost customers and to take advantage of the growing market in the region. The competition is indeed getting tougher, since even MGM Resorts is on the verge of entering the competition with another resort. It will be interesting to see how this industry turns out, especially with all the different competitors in the Macau region trying to beat one another.

Wrapping It All Up…

The casino resorts players are trying to expand opportunities in the Macau region. However, worries over consumers’ willingness to spend and the general economic slowdown are still matters of concern. It is quite difficult to say how things will take shape and who will turn out to be the leader amongst them. I think it is better to stay on the sidelines and wait for the right time to enter the gambling industry.


justhimanshu has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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