Deutsche Bank Analyst Returns From Macau 'Unconvinced' on Recovery (LVS) (MGM) (WYNN)
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Deutsche Bank analyst Carlo Santarelli, after returning from Macau, said he was unconvinced about the shape of the "recovery". Overall, he said he has little confidence in either direction, and he maintained a Hold rating on Wynn Resorts (NASDAQ: WYNN) and Las Vegas Sands (NYSE: LVS), along with his Buy rating on MGM Resorts (NYSE: MGM).
Santarelli explained, "We recently returned from Macau and left broadly unconvinced about the shape of the 'recovery'. The re-affirmation that mass is improving was pronounced, though the slope of the mass recovery and views on the ability for mass growth to offset supply varied. We get the sense that expectations remain low with respect to medium term VIP trends, as most believe junket consolidation will continue and the Nov. / Dec. AML regulations could create another leg down. Net-net, we see WYNN / LVS as expensive here, pricing in a smooth and accelerating GGR recovery, while abandoning concerns of supply driven margin headwinds and aggressive forecasts for 2017."
The analyst added, "We headed to Macau somewhat hoping to identify a silver bullet that would make us more bullish or more bearish, as, we believe, at current levels, the stocks are either overvalued on optimism for a recovery, or undervalued on a true inflection ahead of accelerating supply led mass revenue growth. Unfortunately, we leave with little confidence in either direction as we believe the market is at least stable, but believe more robust growth expectations are a function of the tail wagging the dog, given the moves in the stocks of late. As such, we remain Hold rated on both LVS/ WYNN and believe MGM represents the most favorable R/R."
Shares of Wynn Resorts closed at $107.25 yesterday.
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