Wynn Resorts Ltd. Posts Big Second Quarter, But Major Traps Ahead

Wynn spokesmen explained some of the decline as due to an unusual drop in winning percentage at table games, where the take dropped from 24.2% to 20.4%, quite a significant move.

Despite continuing declines in revenue at Wynn Las Vegas Wynn Resorts Ltd. was able to announce a substantial climb in earnings today as the second quarter financials were made public.

Driven both by enormous growth in the Macau market, where earnings at the Wynn casino was up by 67.5%, and by a one-time tax credit, stock shares paid a dividend of $2.42, up from 82 cents in the second quarter last year.

Macau net revenue rose from $352 million to $530 million, and earnings topped $155 million.

However, Wynn Las Vegas saw net casino revenue drop from $160 million to $120 million. Earnings fell from $155 million to $82 million.

Wynn spokesmen explained some of the decline as due to an unusual drop in winning percentage at table games, where the take dropped from 24.2% to 20.4%, quite a significant move. What could cause such a jump? Did Wynn players become more versed in their hobby as a group?

Wynn is also hoping for huge new revenues from its Encore Hotel and Casino, opening next to Wynn Las Vegas in December, with a $2.3 billion price tag.

While Wynn Resorts stock has seen a resurgence in July, following Steve Wynn's look at an IPO concerning Macau interests and the positive returns from Macau, Sherman Bradley, Online Casino Advisory's senior gaming analyst, feels that traps still lie ahead for Wynn.

"The flagging numbers at Wynn Las Vegas reflect not only the country's general economic hardship, but a rejection by the average gambler of the corporate gamesmanship in which the consumer has been basically dared to afford the elitist costs of the Strip casinos.Not enough people are willing to spend disproportionately, along with sacrificing value and service, to say they stayed at the Wynn anymore; even after an opening bump of interest, Encore is likely to exacerbate that effect, as are CityCentre and other projects coming on line at precisely the wrong time."

"My view would be to tread cautiously with this stock, even as large numbers of shares are purchased, analysts are rating the stock as neutral at best. Macau can only carry the rest of the empire for so long."