The gaming industry has lost ground in recent years due to the global crisis. Lately, we have seen some gaming stocks back in the game. These stocks are undervalued as they have yet to catch up to the overall market. Industry revenue in the first quarter of 2013 easily beat modest analyst expectations.
The rising of Macau
Macau is also known as the “Monte Carlo of the Orient.” In 2007, Macau overtook the Las Vegas Strip in gaming revenue. The numbers are impressive; Macau’s casino sector is more than five-times larger than Vegas’s. Macau’s economy is growing at a rate of 19% per year, faster than mainland China. By all means, Macau is the most important growth engine for traditional gambling.
In 2006, Steve Wynn opened his first casino in China. Today, seven years later, Macau accounts for more than 70% of Wynn’s earnings. Macau will continue to show strong growth in 2013. Wynn Resorts, Limited (NASDAQ:WYNN) operates in Macau under a 20-year concession agreement with the government. Furthermore, Wynn is developing a $4 billion gambling resort in Macau’s Cotai Strip expected to open in 2016. Steve Wynn once joked he will move Wynn’s corporate headquarter to Macau as soon as he learns to speak Chinese.
Wynn resorts is a win-win investment
Wynn Resorts, Limited (NASDAQ:WYNN) forecasts decent growth for 2013 and beyond as the U.S. and Chinese markets continue to recover. Many new opportunities will arise for the gaming company worldwide as more states begin to approve gambling venues in an attempt to offset rising deficits. Both Las Vegas and Macau should continue to contribute to Wynn’s growth.
Wynn Resorts, Limited (NASDAQ:WYNN) plans to unveil an online-gambling venture, which will provide a whole new avenue for growth. The company has already applied for an online- poker license in the state of Nevada, and rumor has it that Wynn engaged in talks with Zynga Inc (NASDAQ:ZNGA) to deliver a “real cash” online-poker platform.
Furthermore, Zynga Inc (NASDAQ:ZNGA) is already gaining experience in the U.K. with its real money venture, Zynga Plus Poker. The recent legalization of online gambling in New Jersey along with Zynga’s reputation for innovation and creativity puts the company in an excellent position to penetrate this highly lucrative market.
Online gaming and competition
The gaming market is shifting to online at a steady pace. Legislators started to realize tax revenue money is “on the floor.” As of today, international online gaming revenue is more than $30 billion and the market is only in the introductory phase of its product-life cycle. The industry is extremely lucrative and Wynn Resorts, Limited (NASDAQ:WYNN) and peers are going to riding the wave.
Giant technology companies such as Zynga Inc (NASDAQ:ZNGA) and Facebook Inc (NASDAQ:FB) are already planning software developments to penetrate the online-gambling field. Facebook Inc (NASDAQ:FB) has already begun presenting its proposal internationally to begin its gold-rush venture. The technology superiority of Zynga and Facebook Inc (NASDAQ:FB), along with the experience and expertise of the Wynn and peers, will probably change the face of the industry in matter of few years.
MGM Resorts International (NYSE:MGM), one of the world’s leading global hospitality companies, has attempted to partner with big poker sites such as Full Tilt Poker and Poker Stars. MGM Resorts International (NYSE:MGM) realized it will lose a large chunk of business if online gambling becomes legal. The casino companies are taking action to prepare for the inevitable transition.
Las Vegas Sands Corp. (NYSE:LVS), the leading global developer of destination properties, is controlled by Sheldon Adelson and is one of Wynn Resorts’ most important competitors. The company is financially solid; Las Vegas Sands Corp. (NYSE:LVS) has reportedly considered a special dividend or a share buyback.
The company is “sitting” on a pile of $2.5 billion in cash, which could come in handy. It’s expanding at a rapid pace and is about to build a new resort in Macau, while considering opportunities in South Korea and Japan. According to Bloomberg, gambling revenue in Macau rose 25% in March, more than double the February pace.
The foolish bottom line
The three giant casinos running the gambling industry are poised for great growth potential. Wynn Resorts, Limited (NASDAQ:WYNN) is my pick given its strong fundamentals as well as it highly diversified business operation including casinos, hotels and restaurants.
Moreover, the potential is enormous to capture billions of dollars in online gambling market share, and Wynn was the first to step in and create an online venture.
The next big winners of the online-gaming boom will be social media giants, such as Facebook and Zynga, that will be able to expand their businesses even further by penetrating an extremely lucrative industry. Having said that, I strongly believe investors betting on Wynn are going to hit the jackpot.
The article Why Placing Your Chips on Wynn Resorts Is Your Best Bet originally appeared on Fool.com and is written by Yaniv Hirsch.
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