The stock I am recommending this
week is a one that’s been hammered since hitting an all-time high back in July,
but I think has been incredibly oversold; Wynn
Resorts (WYNN). Wynn engages
in the development, ownership and operation of casinos and resorts, mainly in
Las Vegas and Macau, China. Wynn
resorts include auto dealerships, casinos, nightclubs, spas, golf courses and
over 2000 suites. The company
recently announced their Las Vegas casino win of $776 million was the largest
all-time casino win in the history of Nevada, exceeding the previous record
they set back in 2007.
On February 2nd, Wynn
reported their Q4 earnings, which beat Wall Street’s expectations. Net income for the quarter Net Income
for the quarter rose 67% to $1.72/share, with revenues rising 8.6% to
$1.34B. Analysts were expecting
earnings to be at $1.52/share and revenues rising to $1.36B. This latest quarter marked it’s fourth
straight growth in revenues and earnings.
Wynn has continued to increase its operating margins, this last quarter
growing to 19%, allowing them to continue to compete in Las Vegas and
China.
Currently Wynn yields 1.80%, so you
will get paid while you wait for the stock to go up. With a $14B market cap, Wynn sports an 18 P/E and a PEG
ratio of just 1.15. With just
$3.11B, the company cares almost $2B in cash on its balance sheet, equating to
$15.38/share in cash. There is
currently a 6.70% short float on the stock, which is pretty large. In my mind, all that means is that any
rally in the stock, will rocket the price upwards as the shorts will have to
cover their positions.
Looking at the charts, I believe Wynn has bottomed
out. On a weekly chart, Wynn has
put in a confirmed 5th wave down at a 52 week low of $101.02. In December, the stock tried twice to
break through $100, but failed both times and rallied, never looking back to
that level since. Turning to a
daily chart, Wynn has spent more than two and a half months building a nice
inverted head-and-shoulder, with the shoulder line bottoming at $107. Additionally, Wynn has rechecked the
long-term downtrend line, drawn from the 52 week high of $172.58. While it’s been trading against that
trendline, Wynn has tried nine times to close below it, yet closed above, every
single time.
Wynn is currently trading at
$113.20, which I think is a great entry price for this stock. I say great upside for the stock, as
I’m looking for a move up to $136.80, which is the 50% Fibonacci retracement
and a 21% gain from these levels.
While I think the stock will be headed up sharply, I think this mess in
Europe could give people a reason to sell off stocks, so give yourself some room
here on the downside. I would use
a stop loss at $104.62.
Full
disclosure: I currently do not own
WYNN and but am planning on initiating a position once I raise some cash.
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