Investors who like the technical case for Las Vegas Sands, Cramer said Tuesday, might like Wynn Resorts even more for its fundamentals. Buyers of the latter get all the benefits of the former, and far few negatives.
One of Cramer’s trusted chartists rated Las Vegas Sands a buy recently, pointing to both the stock’s push above its 200-day moving average and its ability to hold firm at about $10 a share. Technical analysts always see a break through that moving average as a bullish sign, and the continued buying at the $10 mark, which is often home to limit sell orders, means demand is strong enough to buoy the stock. These technicians will admit that LVS is overbought right now, but they say it’s because buyers don’t want to miss the next move.
There’s a fundamental case for the Sands, too, based largely on a coming initial public offering in Macau, China’s answer for Las Vegas. The difference here, though, is that Macau is far outperforming Nevada’s desert oasis. In fact, both LVS and Wynn earn more than half their revenues from Chinese gamblers. LVS has recently run in anticipation of this offering, which will list in Hong Kong as early as next month, and Cramer said it could be good for the company. But for investors, he thinks Wynn is the better play.
Wynn plans to hold an offering of its own for its Macau subsidiary, which will also list on the Hong Kong exchange. The deal might come sooner than Las Vegas Sands’ IPO, and the money generated could reach $2 billion. But while LVS needs the cash to jumpstart stalled building projects in Macau, Cramer thinks Wynn is just trying to show how undervalued the company really is.
Wynn’s enterprise value, or how much an acquirer would have to pay for the company at the current share price, is $7.9 billion. But Cramer figured that just the Macau portion of the business could be worth $6 billion after the IPO. Does that mean the rest of Wynn is only worth $1.9 billion? Highly doubtful. So this offering could translate into tremendous upside for both Wynn and its shareholders. That’s why this stock looks to be a much better bet than Las Vegas Sands right now.
“Wynn is simply much cleaner, safer and a smarter play,” Cramer said, “on gambling in Macau.”
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