“Wynn CEO Goes On Epic Anti-Obama Rant…” — Is Wynn Resorts (WYNN, $166.65) a Good Stock to Own?

Steve Wynn of Wynn Resorts (WYNN, $166.65) publicly decried President Obama’s economic policies and socialist agenda earlier this week.  (see: Wynn CEO Goes On Epic Anti-Obama Rant on Company Conference Call – businessinsider.com, July 18, 2011)

excerpt: “The guy keeps making speeches about redistribution and maybe we ought to do something to businesses that don’t invest, they’re holding too much money. We haven’t heard that kind of talk except from pure socialists. Everybody’s afraid of the government and there’s no need soft peddling it, it’s the truth. It is the truth.”

How Does Wynn Resorts Look as a Stock Market Investment?

Coincidentally, Morgan Stanley raised its price target and earnings estimates on Wynn Resorts (WYNN, $166.65) the next morning (07/19/11). Maybe Morgan Stanley expected that patriots and Tea Partiers all over America will now be inclined to patronize Steve Wynn’s casinos since Wynn was brave enough to start publicly telling the truth about Obama.

Wynn Resorts (WYNN, $166.65) owns and operates a handful of resort casinos in Las Vegas and China. I’ve been to its Encore at Wynn Las Vegas casino, and it’s incredibly aesthetically desirable vs. most of its competitors along the strip. First of all, the air conditioning/cleaning system does a fantastic job of getting the cigarette smoke away from the patrons. If you are a gambling enthusiast who hates the cigarette smoke, the buck stops at Encore. For my occasional trip to Vegas, my gambling now takes place exclusively at Encore. In addition, the atmosphere is more elegant and quiet, less busy and touristy at Encore than at its competitors. (I haven’t visited Wynn Las Vegas, although I would expect a similar desirable atmosphere there.)

WYNN had 2010 sales of $4.2 billion and net income of $160 million in 2010. Projected consensus earnings growth is 154%, 16% and 12% for fiscal years 2011 through 2013. The price/earnings ratio (PE) is 31, which is the highest vs. the stocks I normally write about, but completely warranted based on 2011 projected earnings growth of 154%.

The dividend yield presents a curious situation. Traders and investors might make an extra five percent or so on WYNN’s December dividend, if recent patterns hold. As you can see on this chart, WYNN has a recent history (since 2009) of paying a nominal quarterly dividend followed by a large dividend in December — $8.00 per share last year!

Let’s review the stock chart. During the last eight years, WYNN’s price shot up to $160, fell down to $19 during the 2008 Financial Meltdown, and immediately began its recovery. Now that the stock is revisiting its 2007 highs, its likely to meet resistance and bounce around in the $130 to $160 area for a while. (Remember, there are people who’ve owned this stock near $160 per share for several years now. It’s a big relief to them that their principal has recovered. Enough of them will sell and be done with the stock — for its left a bad taste in their mouth — that the selling will impact the share price near-term.) Barring unforeseen negative events, eventually there will be no more disgruntled sellers, and the buyers will push the price over $160 to establish a new, higher trading range.

Assessment: If I owned this stock and didn’t like to trade much, I would keep the stock for longer-term growth. If I owned the stock and preferred occasional trading, I would sell now, with the intention of buying it back closer to $130. If I did not own the stock, I would ignore it until it dropped down closer to $130 — I just don’t think that it will break through $160 in the near-term, and there are plenty of other stocks which show immediate profit potential.

Happy Investing!

Crista Huff

July 22, 2011

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