Wynn Resorts (WYNN)

Luxury hotels and casino operator Wynn Resorts (NASDAQ:WYNN) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 8.7% year on year to $1.7 billion. Its non-GAAP profit of $1.07 per share was 14% below analysts’ consensus estimates.

Company Overview

Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ:WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.

Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.

Competitors in the luxury hotel and casino industry include MGM Resorts (NYSE:MGM), Las Vegas Sands (NYSE:LVS), and Caesars Entertainment (NASDAQ:CZR).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Wynn Resorts’s 3.3% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer discretionary sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Wynn Resorts’s annualized revenue growth of 28.4% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note that COVID hurt Wynn Resorts’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can better understand the company’s revenue dynamics by analyzing its three most important segments: Casino, Hotel, and Dining and Entertainment, which are 61.2%, 16.1%, and 14.7% of revenue. Over the last two years, Wynn Resorts’s revenues in all three segments increased. Its Casino revenue (Poker, slots) averaged year-on-year growth of 66.8% while its Hotel (overnight bookings) and Dining and Entertainment (food, beverage, Wynn Interactive) revenues averaged 17.4% and 2.9%.

This quarter, Wynn Resorts missed Wall Street’s estimates and reported a rather uninspiring 8.7% year-on-year revenue decline, generating $1.7 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.7% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Wynn Resorts’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 14.9% over the last two years. This profitability was solid for a consumer discretionary business and shows it’s an efficient company that manages its expenses well.

This quarter, Wynn Resorts generated an operating profit margin of 15.8%, down 3.7 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Wynn Resorts’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q1, Wynn Resorts reported EPS at $1.07, down from $1.59 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Wynn Resorts’s full-year EPS of $5.51 to shrink by 10.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Wynn Resorts has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.4% over the last two years, better than the broader consumer discretionary sector.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Wynn Resorts historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Wynn Resorts’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Wynn Resorts’s $16.35 billion of debt exceeds the $2.07 billion of cash on its balance sheet. Furthermore, its 8× net-debt-to-EBITDA ratio (based on its EBITDA of $1.88 billion over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Wynn Resorts could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Wynn Resorts can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We struggled to find many positives in these results as its revenue, EPS, and EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 1.8% to $82.01 immediately after reporting.

Updated: June 14, 2025 at 10:52 PM EDT

When considering an investment in Wynn Resorts, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Wynn Resorts’s business quality ultimately falls short of our standards. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Wynn Resorts’s P/E ratio based on the next 12 months is 17.1x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $106.53 on the company (compared to the current share price of $84.30).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.