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Why Wynn Resorts Stock Is Tanking Again Today

By Howard Smith – Sep 15, 2021 at 12:32PM

Key Points

  • Wynn has only two casinos in Macao, but they made up almost half of its operating revenue last quarter.

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Investors hate uncertainty, and Chinese officials are introducing more to Macao's gambling industry.

What happened

As if the casino industry hasn't been dealing with enough from COVID, including the delta variant, casino operators in the Chinese gambling mecca of Macao might have to face new regulatory headwinds. The stocks of casino owners in Macao dropped yesterday on the news, and more color on the issue has them tanking again today. Shares of Wynn Resorts (WYNN -0.57%), which has two properties in Macao, were down more than 10% Wednesday morning, and remained down 8.2% as of 10:50 a.m. EDT. 

So what

The slide began yesterday when Macao's secretary for economy and finance announced a 45-day examination period for the area's gambling industry. The official pointed to deficiencies in the industry's supervision, according to a Reuters report. 

three slot machine players in casino.

Image source: Getty Images.

Added scrutiny from Chinese officials has some analysts downgrading related names today. Officials are saying they simply want "sustained and healthy development." But references to additional nongambling options and other uncertainties have investors selling first, rather than waiting for actual details of any changes. 

Now what

That nervousness is understandable. Wynn has only two properties in Macao, but they represented 46% of total operating revenue in the second quarter, which ended June 30. And this comes with concerns about how the continuing pandemic, and resurgence with the delta variant, will affect casinos in all locations. 

It seems Chinese officials are trying to support local residents in Macao, and reduce the area's dependence on gambling by adding other offerings. It's impossible to know ahead of time how things in Macao might change, but that's one of the risks with stocks having assets in China. Long-term investors who have appropriate allocations in the sector should probably let things play out, rather than react to the new uncertainty. But that decision comes down to personal risk tolerance, too.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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