Why we think the drop in this casino stock is a buying opportunity

Published Fri, Nov 12 20212:18 PM EST

(This article was sent first to members of the CNBC Investing Club with Jim Cramer. To get the real-time updates in your inbox, subscribe here .) Wynn Resorts is trading lower after the company announced the SPAC deal that would have taken Wynn Interactive public has been terminated. The merger was announced in May and would have valued Wynn's online gaming division at $3.2 billion. The business combination would have provided Wynn Resorts with $640 million in cash to be used on company operations and support new growth initiatives at Wynn Interactive. The decision to nix the deal looks to be related to the change in strategic direction management outlined this past week on the third-quarter earnings call. "In light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy. In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022," Wynn Interactive CEO Craig Billings, who will succeed Matt Maddox as CEO of Wynn Resorts next February , said in a statement Friday. Taking a step back for a moment, we just have to say that we applaud this disciplined approach at Wynn Interactive. Competition in the sports gambling industry is currently so intense, with operators spending on marketing and promotions like mad, driving up the cost of acquisition. This growth at any cost philosophy is unproven, and we prefer to be part of a business that wants to create a sustainable and profitable business model. WYNN is a buy on this dip Shares might be trading lower Friday because Wynn Interactive is no longer locked into the $3.2 billion valuation, but we take no issue with this new development. If Wynn Interactive's capital intensity is declining and the business no longer requires the significant cash infusion, why should Wynn Resorts give up part ownership of the business? We think Wynn Resorts is a buy on today's weakness. In addition to online gaming's disciplined, ROI driven focus, we like how Wynn's Las Vegas and Boston properties delivered record adjusted EBITDA in the quarter thanks to pricing power and market share gains. Patience and a stomach for volatility are still required here due to ongoing restrictions in Macao, but we still believe regulatory concerns in the region will prove to be overblown too. DIS, PYPL are also buys As for the other two names in the portfolio that reported this week, we remain steadfast in our belief that the post-earnings pullbacks in Disney and PayPal should be bought and not sold. Yesterday, we explained why we are sticking with Disney in our write-up . The addition of a ton of new flagship, must-watch content to the Disney+ platform in the second half of 2022 should put the company back on track towards its long-term objectives. Additionally, the recovery in the parks and margin opportunity still looks underappreciated to us. We also believe Disney can unlock additional value through monetizing ESPN and sports gambling and let's not minimize the opportunity Disney+ has ahead of them in the metaverse. On PayPal, we are encouraged by today's positive action and hope that today's move is a sign of a bottom. As we said Tuesday in our write-up , stocks of great companies that get beaten up on temporary dynamics or the occasional misstep by an otherwise strong management team tend to be longer-term opportunities for patient investors. The CNBC Investing Club is now the official home to my Charitable Trust. It's the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way. As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Typically, Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If the trade alert is sent pre-market, Jim waits 5 minutes after the market opens before executing the trade. If the trade alert is issued with less than 45 minutes in the trading day, Jim executes the trade 5 minutes before the market closes. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for the investing disclaimer . (Jim Cramer's Charitable Trust is long WYNN, DIS, PYPL.)

A worker cleans an escalator on Las Vegas Boulevard in Las Vegas, Nevada, U.S., on Tuesday, March 17, 2020.

Joe Buglewicz | Bloomberg | Getty Images

(This article was sent first to members of the CNBC Investing Club with Jim Cramer. To get the real-time updates in your inbox, subscribe here.)

Wynn Resorts is trading lower after the company announced the SPAC deal that would have taken Wynn Interactive public has been terminated.

The merger was announced in May and would have valued Wynn's online gaming division at $3.2 billion. The business combination would have provided Wynn Resorts with $640 million in cash to be used on company operations and support new growth initiatives at Wynn Interactive.

The decision to nix the deal looks to be related to the change in strategic direction management outlined this past week on the third-quarter earnings call.

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"In light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy. In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022," Wynn Interactive CEO Craig Billings, who will succeed Matt Maddox as CEO of Wynn Resorts next February, said in a statement Friday.

Taking a step back for a moment, we just have to say that we applaud this disciplined approach at Wynn Interactive. Competition in the sports gambling industry is currently so intense, with operators spending on marketing and promotions like mad, driving up the cost of acquisition. This growth at any cost philosophy is unproven, and we prefer to be part of a business that wants to create a sustainable and profitable business model.

WYNN is a buy on this dip

Shares might be trading lower Friday because Wynn Interactive is no longer locked into the $3.2 billion valuation, but we take no issue with this new development. If Wynn Interactive's capital intensity is declining and the business no longer requires the significant cash infusion, why should Wynn Resorts give up part ownership of the business?

We think Wynn Resorts is a buy on today's weakness. In addition to online gaming's disciplined, ROI driven focus, we like how Wynn's Las Vegas and Boston properties delivered record adjusted EBITDA in the quarter thanks to pricing power and market share gains. Patience and a stomach for volatility are still required here due to ongoing restrictions in Macao, but we still believe regulatory concerns in the region will prove to be overblown too.

DIS, PYPL are also buys

As for the other two names in the portfolio that reported this week, we remain steadfast in our belief that the post-earnings pullbacks in Disney