Wynn Resorts (WYNN) Could Test March Low

Wynn Resorts, Limited (WYNN) reports second quarter 2020 earnings after Tuesday's closing bell, with analysts expecting a loss of $4.91 per share on a paltry $215.47 million in revenue. The stock had a quiet session after the company released horrendous first quarter results in May, undermined by COVID-19 shutdowns of Macao and Las Vegas properties. The stock is currently trading in the lower half of its 2020 trading range, attracting little or no buying interest.

Key Takeaways

  • Wynn Resorts stock topped out more than six years ago.
  • The majority of gamblers haven't returned to Macao and Las Vegas, despite reopenings.
  • Accumulation readings are close to depressed March levels.

All major Wynn properties have now reopened, but gamblers are staying home, with the Macao Gaming Inspection and Coordination Bureau reporting that July gross revenue fell 94.5% year over year. It wasn't much better in Nevada, with June gaming win dropping 45% year over year statewide and 61.4% in Las Vegas. July improvement is unlikely, given the record number of infections reported in the state during the month.

Wall Street consensus on Wynn stock looks unrealistic given historic headwinds, with a "Moderate Buy" rating based upon 10 "Buy" and just 4 "Hold" recommendations. It's astounding that no analysts believe that shareholders should consider moving to the sidelines at this time. Price targets range from a low of $72 to a Street-high $122, while the stock opened Monday's session about $1 below the low target.

A consensus estimate is a figure based on the combined estimates of analysts covering a public company. Generally, analysts give an estimate for a company's earnings per share (EPS) and revenue; these figures are most often made for the quarter, fiscal year, and next fiscal year. 

Wynn Resorts Long-Term Chart (2007 – 2020)

Long-term chart showing the share price performance of Wynn Resorts, Limited (WYNN)

A multi-year uptrend topped out near $165 in 2007, giving way to a steep downtrend that posted a six-year low in 2009. The subsequent recovery wave completed a round trip into the prior high in 2011, but the stock failed to break out until a 2013 rally wave posted an all-time high in the first quarter of 2014. Aggressive sellers then took control, triggering a failed breakout and steep slide that ended at a six-year low in January 2016.

A strong uptick stalled at the .786 Fibonacci selloff retracement level in 2018, posting a lower high in the long-term price pattern, ahead of a decline that ended at 2016 support near $90. The stock broke that trading floor in the first quarter of 2020, cutting through the 2016 low to an 11-year low before remounting that support level in March. The bounce stalled above $100 in June, yielding a slow-motion decline that could easily accelerate into the selloff low.

Wynn Resorts Short-Term Chart (2018 – 2020)

Short-term chart showing the share price performance of Wynn Resorts, Limited (WYNN)

The on-balance volume (OBV) accumulation-distribution indicator tells a highly bearish tale, failing three attempts to rally above resistance generated by the 2018 double top breakdown (red line). OBV has now dropped to early April levels, perilously close to March's multi-decade low. This dead weight could make it easy for gravity to take control of the tape and drop the stock into a critical test at deep support.

The second quarter bounce reversed at the 200-day exponential moving average (EMA) and .618 Fibonacci selloff retracement level, reinforcing tough resistance above $100. Price action has now failed two attempts to rally above the 50-day EMA, pointing to progressive weakness often seen prior to a major breakdown. The blue line at $63 marks the line in the-sand in this scenario, denoting the .786 retracement of the 2009 into 2014 uptrend. A breakdown could be catastrophic, forecasting downside into the 2009 low in the lower teens.

On-balance volume (OBV) is a technical trading momentum indicator that uses volume flow to predict changes in stock price. Joseph Granville first developed the OBV metric in the 1963 book "Granville's New Key to Stock Market Profits."

The Bottom Line

Wynn Resorts is expected to report atrocious second quarter earnings, with Asian and American gamblers avoiding big venues like the plague.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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