Wells Fargo Raises Estimates, Targets on Casino Stocks But Remains Cautious on Macau Growth (LVS) (MGM) (WYNN) (MPEL)

Analysts at Wells Fargo boosted sales growth estimates for Macau gaming Tuesday morning, also raising valuation ranges for the major player's stocks in the process. The firm now expects 2012 revenue growth around 18 percent, up from a prior estimate of 11 percent. The firm pointed out the Street's consensus estimates were recently increased to a 20-25 percent range.

Wells Fargo said the increased revenue model reflects: "(1) much stronger-than-expected mass market growth in Q1 2012, and (2) slightly stronger-than-expected VIP volume growth in the quarter." The firm sees 12 percent growth in the VIP segment, 34 percent growth in the mass segment, and 20 percent growth in slot sales.

Despite the boosted outlook, Wells Fargo said it remains cautious on Macau gaming revenue growth in 2012 amid:

1. VIP revenue growth which will continue slowing, given the impact of the table cap and macro concerns,
   
2. mass market comparisons which will become very difficult in H2 2012, and
   
3. LVS will likely need to reallocate approximately one-third of its tables from existing properties to Sands Cotai Central -- a factor not widely appreciated by the Street.

Within the sector:

• Las Vegas Sands (NYSE: LVS) - FY12 EPS estimate raised from $2.47 to $2.61, FY13 estimate raised from $2.91 to $2.94. Valuation range boosted from $43-$52 to $52-$61. Market Perform maintained.
  
• MGM Resorts (NYSE: MGM) - FY12 estimate from loss of 62 cents per share to loss of 51 cents per share, FY13 estimate from loss of 29 cents per share to loss of 19 cents per share. Valuation range raised from $13.50-$15.50 to $14-$16. Outperform maintained.
  
• Wynn Resorts (Nasdaq: WYNN) - FY12 estimate from $5.25 to $613, FY13 estimate from $6.29 to $7.23. Valuation range raised from $103-$124 to $114-$136. Market Perform maintained.
  
• Melco Crown (Nasdaq: MPEL) - Valuation range upped from $11-$13 to $16-$18. Outperform maintained.

These stocks are mixed Tuesday afternoon: Las Vegas Sands shares down 0.9 percent, MGM shares down 0.7 percent, Wynn shares about flat, and Melco Crown shares up 0.7 percent.

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