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Jennifer Robison

Wynn share loss wipes out $2.2 billion in stock market value

30 April 2015

Wynn Resorts Ltd. ended Wednesday worth billions less than its value at breakfast.

Shares in the gaming giant fell by $21.71, or 16.6 percent, on volume of about 15.7 million shares — nearly eight times average volume. Based on the 101.52 million outstanding shares reported by Google Finance, the loss wiped out about $2.2 billion in market capitalization.

Wynn Resorts’ loss was equivalent to nearly the entire market capitalization of Las Vegas-based Allegiant Air, which was worth $2.8 billion Wednesday. It equaled nearly five times the $415 million it took to renovate the SLS Las Vegas, and it was twice the $1.15 billion education tax-increase package in front of the Nevada Legislature.

The steep drop in value followed Wynn Resorts’ Tuesday earnings report. The company reported a first-quarter loss of $44.6 million, or 44 cents a share, on revenue of $1.09 billion. Sales fell 28 percent year over year, and the company missed analysts’ consensus estimates on earnings per share by nearly 50 percent.

The results were tied to a slump in Macau, where gaming activity has fallen as government officials have cracked down on corruption and curbed junkets to the market.

New restrictions on travel from mainland China to the island haven’t helped, either.

“The trends in Macau were beginning to be very visible in the fourth quarter,” Chairman and CEO Steve Wynn said in a conference call Tuesday. “Our hopes for a turnaround during the Chinese New Year turned out to be incorrect.”

The Las Vegas company quickly responded by cutting the dividend to 50 cents a share. In previous quarters, the company has issued dividends of $1.50 and $2.50 a share. Wynn said the company’s board “would not hesitate to continue to reduce the dividend” in coming quarters.

Wynn said he expects a soft second quarter as well, as “degradation of volume” in Macau has persisted into April.

The deteriorating conditions had analysts revising their outlooks on Wynn on Wednesday.

Wells Fargo analysts noted the conference call’s tone “was extremely bearish.” They slashed their earnings estimates for the company in 2015 and 2016 by more than 18 percent.

Susquehanna downgraded the company from positive to neutral, noting Wynn’s forecasts for a soft outlook driven by a stronger dollar, less play from Asian consumers and a “jobless” economic recovery. And Janney Capital markets lowered its price target to $100 from $140 while maintaining its neutral rating.

Credit Suisse also maintained its neutral rating, but dropped its price target to $115 from $125 given Wynn’s focus on the high end rather than on mass-market and convention customers.

Even firms that rated Wynn a buy lowered price targets.

Brean Capital cut its target from $174 to $153, while Stern Agee pared its target from $155 to $138.
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