The casino industry is another casualty of the coronavirus pandemic, having been forced to shut down to help prevent the spread of the virus. Yet now that gaming houses have reopened, albeit with social distancing protocols in place, casino operators are betting they can begin the rebuilding process.

Although Wynn Resorts(WYNN -0.06%) stock has more than doubled in value from the low point it hit in March, it remains more than 45% below where it traded before the crisis struck.

Doubts about a quick comeback for casinos are valid, but times of turmoil are often opportunities to capitalize on the walls of worry. Still, investors have a lot to consider before making a big bet on Wynn, so let's take a closer look at what the casino operator is facing.

Wynn Palace casino

Image source: Wynn Resorts.

Macao remains a ghost town

Wynn Resorts casinos in Macao were shut for just two weeks in February, but the reverberations of those closures and the still-lingering coronavirus pandemic means there's virtually no traffic at its gaming halls.

Monthly gaming revenues on the peninsula, the only place in China where it's legal to gamble, have plunged 80% or more for five consecutive months and have been down 97% in two of the last three.

Chart of Macao monthly gaming revenue

Data source: Macao Gaming Inspection & Coordination Bureau. Chart by author.

Because the integrated resort operator generates approximately three-quarters of its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from Macao, it has been affected more by the circumstances there than either Las Vegas Sands or MGM Resorts.

Analysts at Morgan Stanley just revised their gaming revenues estimates lower for this year to down 60% versus their previous estimate of down 55%. But they slightly increased their outlooks for 2021 and 2022, which they expect to more than double and then rise 20%, respectively.

They also think casinos will achieve break-even status on EBITDA in the third quarter of this year, and though they don't know when the resort operators will regain their previous EBITDA levels, the analysts said they were modeling it to occur in 2022.

Las Vegas still has tumbleweeds blowing through

That should give investors hope the bottom has been reached, even if we're still bouncing along that bottom. But the upturn may still be a ways off, which could mean Wynn's stock will continue trading in the relative narrow range it's been in for the past few months, albeit with a spike or drop thrown in the mix.

A lot still rides on how Las Vegas does now that it is open again. Despite representing just a quarter of Wynn's revenue, casinos were closed down for three months in Nevada and gamblers haven't shown much propensity for returning just yet.

Rising numbers of COVID-19 cases in the state seem to be causing some reticence among gamblers as JPMorgan Chase estimates just 350,000 people visited casinos last Saturday, compared to 400,000 on Saturday the week before, and some 550,000 on July 4.

Moreover, there are still few if any meetings, conventions, or entertainment business opportunities in Las Vegas, which will have an ancillary impact on performance.

Wynn had just reopened its newly expanded convention and meeting space in February, which was intended to drive both revenue and traffic at its hotel as well as at its restaurants, bars, and retail businesses long term. 

Food, beverage, entertainment, and retail represented 46% of revenue from Wynn's Las Vegas operations last year, and if you include room rates in the mix, over three-quarters of its revenue comes from non-gaming related activities.

Recovery remains in the future

What we're seeing is the bar is being set very low for Wynn Resorts next year and the year after. The casino operator still has a fairly solid balance sheet despite the calamity of the last four months, but casinos reopening for business everywhere could increase cash burn if gamblers don't return.

It has to contend with diminished foot traffic as consumers exercise discretion on returning, which has implications for business growth opportunities until the all-clear is given on the pandemic front. But Wynn should be able to not only hang on, but grow from here on out, and I'd say that makes the resort operator a buy at this time.