Wynn Keeps Winning With Fresh Eyes on Vegas

Wynn Resorts (NASDAQ: WYNN  ) doesn't seem able to go anywhere but up, and it's easy to understand why. With the seemingly never-ending push of Macau gaming growth, the casino operator would be hard-pressed to miss this phenomenal growth wave. In contrast to Las Vegas Sands, Wynn is more focused on VIP gaming and less on mass-market. At times, that can create a more volatile business -- but it keeps high-rollers coming back for the most premium experience around. With one $4 billion-plus resort getting closer to opening day and another in the pipeline, the odds for this stock are well in investors' favor.

Win
Wynn Resorts surpassed analyst estimates by more than $0.20 per share as it achieved another round of double-digit net income growth (14.3%, in the just-ended quarter). Leading the way as usual was Macau, with slightly more than 14% growth in revenue, while Las Vegas revenue contracted by about 1.5%.

Investors need not worry about the Las Vegas segment, despite the sales drop. Steve Wynn, the founder and CEO of the company, is one of the best, most insightful voices in the industry. On the earnings call Thursday, Wynn alluded to "things that are happening that are worth discussing." Vegas profit was actually the highest it had been in some time, and the company believes that its strategy of quality over quantity (not pushing via room count) ultimately makes it the best player on the Strip.

Wynn wants investors to view the Las Vegas market as being in a state of catch-up. During the pre-Recession building boom, the Strip built up its capacity dramatically. Now, the demand may finally be ready to fill in that capacity.

Macau wows
As mentioned, Macau continues to drive the company ahead at incredible rates. Interestingly, though, management was more bullish on the mass-market segment than the VIP, perhaps due to the burgeoning middle class in China and surrounding areas. Turnover increased 23% in mass market (26% in VIP), though preliminary April figures show 55% gains at the mass tables.

Down the road, investors can look forward to Wynn doubling the size of its gaming presence in Macau. The company's Wynn Palace is expected to go online in the beginning of 2015, and the project is set to add more than 550 tables to the existing 492. Hotel room counts will rise markedly as well.

Analysts peg overall Macau 2014 growth anywhere from 14% to 22%, and Wynn will be right there to benefit going forward. Growth should keep up its double-digit pace through at least 2015 before slowing down. Even then, the company is poised to continue growing its share of the Macau gold mine via capacity increases and industry-leading slot machine efficiency.

The bottom line
Wynn certainly isn't a cheap stock at nearly 24 times forward estimated earnings, but this stock has the potential to continue the near vertical run it's been on over the past few years. Management is the best in the business, and the company's ability to get more out of each unit and segment than its competitors allows its smaller footprint to remain competitive with the larger players such as Las Vegas Sands.

In the red-hot gaming industry, this remains the top pick. Investors should keep an eye on the sleeper story here -- Las Vegas, with the comfort of Macau undoubtedly leading the numbers higher.

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