3 Reasons to Sell Wynn Resorts' Stock

By Markets Fool.com

It's been a rough year for Wynn Resorts . The stock is down 42% from its 52-week high and its main market in Macau is deteriorating at a rapid rate. Even with today's discount, the stock could fall further -- we don't know how bad Macau's gaming market can get.

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Here are the three biggest factors investors need to be worried about in 2015.

Macau's slowdown may not be done
What has happened in Macau over the last six months has been nothing short of shocking. Gaming has fallen off a cliff after a decade of steady, and remarkable, gains, and no one knows exactly where it's going to stop.

Source: Macau Gaming Inspection and Coordination Bureau.

Most of the drop has been blamed on a crackdown on corruption within Mainland China. It's possible that some VIP players were affected, but even those who weren't have been weary about going to Macau to gamble away millions of dollars.

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The problem for investors today is knowing just how bad it's going to get. If gaming revenue continues to fall, shares will certainly go with them. That's the #1 risk for the stock in 2015.

Las Vegas isn't as hot as it used to be
Wynn Las Vegas is the most profitable resort on the Las Vegas Strip, that's without question. But fourth quarter revenue was down 15.5% to $376.8 million, and EBITDA fell 10.4% to $111.2 million.

Ironically, it was actually Asian gamblers, not U.S. players, who shied away from Macau and are also shying away from Las Vegas, and Wynn Las Vegas in particular. In the fourth quarter, baccarat win -- which is the single largest revenue generator in Las Vegas nearly doubling blackjack revenue -- was down 28.8% from a year earlier, and with a major focus on high rollers Wynn was hit very hard.

Like Macau, no one knows if or when these players are coming back. The only silver lining for Wynn Las Vegas is that more than half of its revenue comes off the gaming floor, and those lines of business are still doing very well. But for the bottom line baccarat is a big deal, and Las Vegas just isn't as lucrative as it used to be.

Wynn Palace in the Cotai region of Macau. Image source: Macau Resorts.

Wynn Palace is already delayed
Anyone even considering owning Wynn Resorts is likely looking at Wynn Palace in the Cotai region of Macau as a big reason why. I've predicted that this single resort could double Wynn's overall revenue and profitability when it opens in 2016.

Until now, Wynn has said that construction is on-time, but during the fourth quarter conference call Steve Wynn said they had gotten notice from their construction contractor that the project was delayed and would likely miss Chinese New Year 2016. That's a big deal, as gaming revenue typically spikes during Chinese New Year.

This isn't the only project delayed, and the cause is a labor shortage in Macau, something Las Vegas Sands is also dealing with in building The Parisian. But it is a concern, especially when millions of dollars per day are at stake during the delay. The quicker Wynn Palace is operational the quicker Wynn's revenue will grow, so investors don't want to see any further delays in this major growth project.

Uncertainty abounds in Macau, and for Wynn Resorts, if these three factors don't improve, it could be another bad year.

The article 3 Reasons to Sell Wynn Resorts' Stock originally appeared on Fool.com.

Travis Hoiumhas contributed to Wynn Resorts' revenue by staying in expensive hotel rooms and paying for overpriced drinks at Wynn's nightclubs. He justified some of that spending because he owns shares of Wynn Resorts, Limited. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.