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Is WYNN Stock a Solid Long Term Investment?

Wynn Resorts

There is no doubt that people typically enjoy spending time at resorts in faraway places, especially if there is the popular casino involved in the prospect. As such, Wynn resorts has proven to be one of the more popular options for people who are looking to get away in the Las Vegas area. Traded publicly on the stock market as WYNN, it's interesting to see how this particular stock has performed in recent years. It's also worth noting that even though the company has been in existence since 2002, there have been a lot of extenuating circumstances that have had an impact on the company's ability to operate and as a result, their performance in the stock market. This was never more true than throughout the pandemic when everyone was essentially locked down into their houses for months on end. When you make your living as a casino and getaway resort, it's very difficult to continue making a profit when people are not allowed to come to your resort to spend money. That said, there isn't any question that resorts and casinos are going to continue to operate well into the future. Therefore, you might be asking yourself whether or not this particular stock is a long-term investment that might be right for you. There’s no doubt that there is a lot to unpack here, so let's get started.

Surviving the Rough Patches for Future Growth

No one is going to argue the fact that virtually every resort went into crisis mode over the course of the last two years. Some of them have since come out of the red and are operating at a profit and others are still struggling. Still others shuttered their doors forever, knowing full well that they could not take the brunt of what was coming. For the most part, that involved those facilities that were already struggling financially. They simply couldn't take another blow, especially not one as significant as what has occurred over the course of the last two years. Others, like Wynn Resorts, were in a far better position to handle the cards that they had been dealt successfully. While the company has experienced losses in their last quarterly report, their stock is currently up by 4.56%. As a matter of fact, a single share of stock in Wynn Resorts currently sells for $96.26. Obviously, this is not a stock that is for the faint of heart. Simply looking at the price tag alone should tell you that much. If you really want to make any appreciable amount of money, you will have no choice but to purchase several shares. When you're paying almost $100 per share, you're not going to be able to get enough shares to make any appreciable difference if your budget tops out at $300. Even if you're willing to spend $500, you're not really putting yourself in a position to make enough money for it to make a significant amount of difference in the long run. That's because the stock could be sold for three times what you're currently paying for it and you still wouldn't make $1,000 worth of profit by the time you deduct what you're spending in order to purchase it in the first place. In short, this or any other stock that costs this much per share is basically for people who are very serious when it comes to long-term investments. If you really want the potential for a big payday, you have to be willing to invest a significant amount of money in the first place. The truth is, a lot of stock market experts recommend investing no less than $5,000. Let's hypothetically say that you invest $5,000 at the current purchase price and somewhere between the next three to five years, the stock triples in value. After you've deducted your initial investment of $5,000, you have the opportunity to make just over $10,000. That's a fair enough payday, but it's still not enough to pay for one child's college education, pay off your mortgage or pay for a second home. In reality, it's not even enough to pay for a new car. Truth be told, you'd be lucky to find any college where that amount of money would pay for a single year's worth of education for one child. You'd actually be hard-pressed to pull that off at today's prices so by the time another five years has passed, it’s likely to be all but impossible.

The Name of the Game

Unfortunately, this is the type of thing that you have to carefully consider when you're talking about this or any other stock as a long-term investment. When you look at the numbers, it's obvious that you're counting on the stock being worth significantly more than it is right now in order for your gamble to pay off. Obviously, the more money you invest when you purchase your initial shares, the more money you can potentially make several years down the road, provided the stock performs as you expect it to. Remember the example about investing $5,000? That's a significant investment. It's not exactly like there are loads of people that have $5,000 worth of discretionary income just lying around waiting to be spent on something that may or may not benefit them later on down the road. When you realize that you can spend $5,000 today and only make $10,000 even if the stock triples in value, it's a sobering reality check. Of course, your payday will be bigger than that, but you have to remember to take out the money that you spent for your initial investment. If you want things to get even more sobering, consider this fact. You could invest as much as $10,000 today and under the exact same circumstances, you'd only stand to clear a profit of just over $20,000. That's something that you have to take into account when you're deciding whether or not this particular stock is worth the risk. Considering its high purchase price, it may not be worth it because even if it does perform at a high level in the future, it's unlikely that it's going to perform well enough for you to make the money you're hoping to make.

Peer Pressure

As you can see, it's very difficult to make an appreciable amount of money with any long-term investment that costs almost $100 per share. That said, you should consider yourself lucky in the sense that when it comes to comparing Wynn Resorts to the competition, they seem to have figured things out much more quickly. Even when the pandemic was still largely raging throughout the United States, they were the company that was beginning to show signs of improvement before almost anyone else in that particular sector. Part of that early recovery is because they've had a very solid financial foundation for a number of years. The other part is because they appear to have been better prepared for the unexpected than a lot of their competitors, something that is easier to do when you're making loads of cash on a daily basis. At the end of the day, this was the company that was still standing tall while others were collapsing right and left. That's all well and good, but that doesn't necessarily mean that you should be investing in this particular stock as a long-term option. Granted, you may not lose your shirt with such an investment, but when you sit down and do the math, it just doesn't seem like it's worth the risk. While the company isn't likely to shutter its doors and file for bankruptcy anytime in the next three to five years, a lot of stock market analysts are not sold on the idea that it's capable of tripling in value, either. Imagine what would happen if it only doubles in value. Going back to the numbers once again, imagine that you've invested jJust over $5,000 in order to purchase 52 shares. If you hold on to the stock until it doubles in price and then you sell, you only stand to make about half as much as you could make in the earlier example. Worse yet, you might find yourself in a situation where the stock has actually decreased in value and you're holding on to it forever in hopes of breaking even. Clearly, you're not participating in long-term investments just to break even. If that's the case, then there is really no point in participating in this kind of trading at all. All things considered, this particular stock would have to become worth four, five or even six times what it is currently selling for in order for you to make a great deal of money. Even when you're talking about a company like Wynn Resorts, that's not a very likely scenario. It's certainly not one that most people would be willing to gamble $10,000 on. Most investors would probably find it equally difficult to invest even $5,000. The potential for a significant payday just isn’t there with a stock that requires this kind of investment. As a result, most people would rather find something else they can invest in, something that is selling for a fraction of its potential worth. That is where the real money can be found in a long-term investment.

Changing Business Practices

It shouldn't come as any surprise that the company decided to change a few of its business practices while covid had everything shut down. As far as their resorts in Las Vegas, they didn't really change anything as much as adding a new convention space that is sure to add additional revenue in the future. However, they also operate a couple of resorts in Asia and they have made some major changes there. In short, they're moving to a much more high-end clientele in that area that will potentially allow them to do bigger business with fewer restrictions. Only time will tell exactly how things will eventually pan out, but it could mean good things for the company. Despite that fact, most stock market analysts still don't see the company’s stock making any significant gains over its current purchase price. That doesn't necessarily mean they expect it to fall, only that it's already selling for so much that it would be difficult for it to increase enough to be worthy of a long-term investment.

Better Options Exist

At the end of the day, most stock market experts believe that there are a number of better options that could potentially allow you to make more money with your long-term investments. Some of them don't believe that the company is capable of doing much better financially than it’s doing right now and that means that there is a huge risk involved in purchasing a number of shares, all in hopes of seeing the stock’s value increase exponentially. Those that do recommend investing in the stock claim that you shouldn't even consider doing so if you're not willing to spend at least $1,000. That said, $1,000 isn't going to get you more than 10 shares. As such, you're basically right back in the same boat that you've been in all along where the stock is simply not capable of getting you the payday that you're probably hoping for.

Choosing solid long-term investments is the way that you can build your portfolio over time. The key word here is solid. However, there are other things that must be considered as well. The current purchase price of any stock that you might be considering is definitely at the top of that list. Ideally, you want to purchase something that has decreased in value, yet has a reasonable explanation for it. That gives you a chance to get your foot in the door when the stock is at a low point. If everything works out in your favor, it also gives you the opportunity to watch that stock go up in value, allowing you to sell at just the right time. That's precisely why this particular stock isn't the best option for a long-term investment. The price per share is just too high for it to be an effective investment unless you can literally afford to spend thousands of dollars in order to purchase shares at the current price.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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