Investment firms sees free cash flow improving at casino.
Wynn Resorts (WYNN) received an upgrade from investment firm Goldman Sachs, from neutral. The bank also raised its price target on the stock to $155 from $140. With shares around $111, the implied upside is almost 40 percent higher from here.
Shares of Wynn Resorts have traded as high as $150 in the past year, and as low as $90, so shares are still on the lower end of their 52-week range.
The upgrade cited the completion of major capital projects at the casino chain, which should improve cash flow going forward. The addition of new properties in Boston and Las Vegas should also increase domestic growth.
Shares are down 18 percent in the past year, as swings in market perception on the value of casino shares have hit the entire sector and led to many insider buys and merger activity.
Action to take: We like shares up to $115. Besides the reasonable valuation at 15 times forward earnings, investors can also pick up a 3.6 percent dividend right here. Given the ups and downs of shares, buying and collecting the dividend means you’re on the side of the house that always wins.
Speculators may want to consider buying a call option as a far safer bet than the blackjack table. In the option space, the June 2020 $150 calls are far enough out and cheap enough out to see if shares can hit the Goldman Sachs price target.