Wynn Resorts Ltd. shares fell in trading Friday as some investors found its stock too high priced, despite its strong quarterly performance.
THE SPARK: The Las Vegas-based company said Thursday that it made more money than expected in China, which drove its third-quarter earnings above analyst forecasts. But its stock is up more than 50 percent so far in 2013, making it less attractive to some investors and shares fell.
THE BIG PICTURE: Wynn, like many casino operators, has benefited from gains in the Chinese gambling enclave of Macau. It is the only place in China where gambling is legal. It opened to foreign investors in the early 2000s and a number of U.S. casinos have opened sites there, which helped many survive a slowdown domestically.
THE ANALYSIS: While many analysts were bullish on the quarter, Stifel Nicolaus Capital Markets analyst Steven Wieczynski reiterated a "Hold" rating on the stock. While the Macau market continues to deliver outsized growth relative to other legalized gaming jurisdictions, the analyst questioned whether investors would be willing to buy in at higher levels.
After adjusting for the portion of money gambled that the casino retains, he was somewhat disappointed in its performance in Macau and expects gains there should slow. The better-than-expected revenue from Macau also was more than offset by weak performance in Las Vegas.
SHARE ACTION: Shares fell $6.51, or 3.8 percent, to $166.34 in afternoon trading amid a broader market uptick.