Wynn Resorts (Nasdaq:WYNN) and gaming stocks are starting to titillate traders. Earnings news has been digested and now we look to see if all boats are rising on the tide. First you need a generally improving stock market which should be the case for the next few weeks.
Then you need the momentum boys to start chirping which is starting to happen. The charts and technicals looking good they say.
No saying WYNN isn’t gonna run some. But here is the Black Swan Event WYNN needs to think about. Macau is the only Chinese main land location to allow legal gambling. The licensing fees increase over time and the capital cost continue to rise. Beijing will want to set up a competitive apparatus somewhere to keep foreign exchange in China and tap into a huge Chinese market that cannot readily access Macau, WYNN and others.
They may even be nice about it and offer the operators in Macau first opportunity. But it will happen sooner than later. The bastards in Beijing are not beholden to the SEC or any other western imperialist tools. They may even short WYNN and others before their announcement and start being profitable right from the get go.
WYNN’s Macau occupancy is now around 95% so even the simplest economic analysis points to expansion profits. The current forward PE is around 19. How much bigger can the multiple grow?
The Chinese Black Swan will come out of nowhere. So if your trading, protect your self in all the usual ways. Stop loss, puts yadda yadda yadda.
WYNN is particularly vulnerable because it grew up in the Nevada fish bowl. they even have a Governor on the board. they are used to being part of the house that controls the house. Macau and China are not the same. In the mean time can it pop? You bet. and that’s what you are gonna do. Bet! good luck.
George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti And now I’m off to check out this Chinese translation tool. Hmm