Caesars, Wynn Resorts among Stifels’ Best Gaming Action Ideas

Posted: Jan 8, 2022, 1:09 p.m.

Last update on: January 8, 2022, 01:21 a.m.

Amid the spread of the omicron variant of the coronavirus and a disappointing employment report in December, travel and leisure stocks collapsed last week, underscoring that investors need to be selective in the market. space this year.

game actions
Caesars Palace Las Vegas. A research firm is bullish on Caesars and Wynn for 2022 (Image: India time)

In this sense, Stifel analyst Steven Wieczynski and his team are bullish on some travel and leisure stocks for 2022. While analysts point to a preference for some cruise line amusement park operators, Caesars Entertainment ( NASDAQ: CZR) and Wynn Resorts (NASDAQ: WYNN) are among the research company’s best game ideas for this year.

If you want speculation, Macau names should be at the top of your list. We actually think the Macau-centric names could represent some of the more compelling ideas given the massive underperformance in 2021 coupled with benign investor expectations, ”said Wieczynski and his team at Wynn. “We like the current risk / reward setup in the name at this point. “

Stifel maintains buy odds on Wynn and Caesars with price targets of $ 124 and $ 138, respectively, on casino stocks. The research company calls Wynn its top large-cap game pick for 2022, while Caesars is its favorite regional game idea.

Macau’s heads could finally subside

Due to China’s zero-tolerance policy on COVID-19 and previous speculation about a stricter regulatory environment in Macau, dealers, including Wynn, have no shortage of criticism.

There are, however, a few green shoots emerging. The Special Administrative Region (SAR) regulatory proposals, although more rigid than before, are seen as not too burdensome for operators and the consensus is that building officials will tackle the issue of license renewals before release. June deadline. This could remove an overhang on Wynn stocks.

Additionally, while analysts believe there are challenges for VIP dependent operators, including Wynn, due to the fact that retail business is drastically altered, operator Wynn Palace may compensate for the weakness. from this demographic to mass and premium mass customers.

“Consistent with what we have heard from other operators, WYNN management has indicated that the current pace of market visits when conditions permit continues to show strong pent-up demand,” adds Wieczynski. “Ultimately, we believe WYNN is well positioned to benefit from improving visitation trends as we expect its focus around the VIP and premium mass sourcing segments to enable the business to recover fairly quickly. “

More support for Caesars

Caesars brought in almost 26% last year and it enters 2022 as one of the most beloved game titles. Caesars is the second-largest operator on The Strip, where it earns about 43% of its real estate profits before interest, taxes, depreciation and amortization (EBITDA).

Stifel analysts note that while it will take time for iGaming and online sports betting to reward Caesars investors, and Las Vegas is still awaiting the return of convention traffic, there is still a lot to like about the game. stock. These characteristics include prodigious free cash flow generation, which could reach or exceed $ 10 per share.

“As long as the world remains on a recovery path, we believe investors will focus more on what this business will look like in 12 to 24 months,” Wieczynski said. “We continue to believe that this is the best management team in the game and we expect them to create significant shareholder value throughout 2021 and into 2022.”

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