Analysts mixed on Wynn earnings expectations

Tuesday, May 10, 2005 | 11:02 a.m.

Wynn Resorts Ltd. said it spent $38.1 million in the first quarter to market and promote the Wynn Las Vegas resort prior to its April 28 debut. That compares to $14.6 million in marketing costs in the first quarter of 2004.

The results, reported to the Securities and Exchange Commission last week, show a loss of $37.6 million compared with a loss of $13.2 million in the same quarter of last year. Analysts said the losses are to be expected given that the company hadn't yet opened its megaresort.

Some analysts have recently lowered their price targets and earnings expectations for Wynn Resorts, saying events such as the opening of Wynn Las Vegas and expansion projects in Las Vegas and the Chinese enclave of Macau have already been factored into the stock price.

Goldman Sachs analyst Steven Kent lowered his rating on Wynn Resorts shares to "inline" from "outperform," calling Wynn a "more speculative" investment in an industry that is overpriced relative to hotel and cruise ship companies.

"After many years of outperformance, the gaming stocks now face a headwind of premium valuations to historical levels, rising competition in core markets and limited near-term new market openings," Kent wrote in a research note Monday. "When we look into the next few months we see few new positive catalysts for Wynn."

Legg Mason Wood Walker stock analyst Steven Wieczynski defended the company in a separate research note today.

"While we acknowledge that Wynn shares are not inexpensive, we believe that the momentum generated by this month's opening of Wynn Las Vegas and the extraordinary growth opportunities over the next few years warrants the current share price," he said.

Wynn Resorts stock fell 71 cents per share to $46.90 in midmorning trading today. Shares peaked at $76.45 in mid-March.