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Against the Grain: Janney Upgrades Wynn (WYNN) to Buy; Sees Positive Risk-Reward on Macau Outlook

February 1, 2013 11:26 AM EST Send to a Friend
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Price: $185.05 -4.06%

Rating Summary:
    22 Buy, 9 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 14 | New: 52
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Wynn Resorts (Nasdaq: WYNN) is trading lower following fourth-quarter results issued after the market closed Thursday. Shares are 1.4 percent on volume Friday.

Some think the dip might be a buying opportunity. Janney analyst Brian McGill made an "against the grain" call this morning with his team upgrading Wynn shares from Neutral to Buy while boosting its fair value target from $120 to $175. He sees the existing business being worth $125 and the Cotai development adding another $75 of value.

McGill sees a favorable risk-reward scenario playing out at Wynn, leading to EBITDA upside if Macau growth comes in better than expectations. With Wynn leveraged to the VIP segment in Macau, better growth is expected at the end of the current government leadership transition.

GGR results for January are tracking ahead of expectations amid the Chinese New Year moving into February. Existing property growth should be strong as no supply sets are expected to come online over the next 24 months.

For Wynn's U.S. operations, discussions on Philadelphia and Massachusetts properties are still far off, but McGill thinks Wynn would be able to add further value to the properties if they win licenses, adding further value to the stock.

Shares of Wynn are down 1.6 percent Friday, but just coming off levels near its 52-week high of $130.78.




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