Wall Street backs Club holding Wynn Resorts as Macao tours from China get ready to reopen

Published Mon, Sep 26 20223:23 PM EDTUpdated Mon, Sep 26 20223:44 PM EDT

China's long-awaited decision allowing tour groups from the mainland to travel to Macao sent shares of casino companies with operations in the Asian gambling hub soaring Monday. Club holding Wynn Resorts (WYNN) was among them, jumping more than 12%. We have held on to a small position in a tough year for the stock on the expectation it would benefit once China ultimately eased some of its draconian Covid rules that have severely limited travel to and from the mainland. Macao is a special Chinese administrative region. Wall Street analysts were bullish on the news, issuing decisive takes on Wynn's likely rebound. JPMorgan said the policy shift, which is the first move to allow e-visas and group tours in Macao since the beginning of the pandemic, is a positive development that investors weren't expecting. Citi increased Wynn's price target to $91 per share, up from from $87.50. A research note by Jeffries called the announcement "the moment we've been waiting for." Analyst David Katz re-rated Wynn higher, to buy from hold, with a price target of $75, a roughly 21% increase. The bank predicted Wynn revenues could increase by 35% in 2023. China's efforts to tepidly ease Covid restrictions is a helpful catalyst for casino companies doing business in Macao. It could prove a turning point for Wynn, whose earnings have been under pressure. Macao is planning to welcome back Chinese tourists in November. In its fiscal second quarter , ending June 30, Wynn missed on expectations for top line growth, bringing in $908.8 million in total revenue, compared with analyst predictions of $987 million, according to FactSet. At Wynn Macao, operating revenue was $58.6 million, a decline of about 68% year-on-year. Bottom line We've held our small position in Wynn because we have viewed the reopening of Macao as a when, not if, scenario. It's been clear that China can't maintain its so-called zero-Covid policy much longer without risking the further deterioration of its economy. The news from the weekend was encouraging, as it finally puts a light at the end of what has been a dark tunnel. We still have questions around the pace of the reopening and the upcoming concession renewal process with Macao authorities, but we think the pent-up demand will be significant. (Jim Cramer's Charitable Trust is long WYNN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

People use their smartphones to take photographs outside The Wynn Macau casino resort, operated by Wynn Resorts Ltd., in Macao, China, on Tuesday, Jan. 30, 2018.

Billy H.C. Kwok | Bloomberg | Getty Images

China's long-awaited decision allowing tour groups from the mainland to travel to Macao sent shares of casino companies with operations in the Asian gambling hub soaring Monday.