The balance sheet at Wynn Resorts (WYNN) is so terrible that, as a threshold matter, it precludes me from ever considering an investment in this casino stock.
Last August, Wynn Resorts opened its $4 billion ode to excess in Macau. The expenses were obscene, with the lake alone costing over $100 million. The best-case analyst scenario calls for this resort to contribute $210 million in annual profits to the bottom-line for Wynn shareholders. The pessimistic forecasts are not even sure that this resort will be profitable over the long term.
The problem is that the Macau Wynn Resort has been funded entirely with debt. This radically altered Wynn stock’s risk profile for the worse.
In its early days, Wynn Resorts used leverage responsibly. From its IPO until the Macau project, Wynn’s balance sheet was never leveraged more than ten to one. Even as recently as five years ago, Wynn Resorts … Read the rest of this article!