Goldman Sachs Names Wynn Resorts as a Top Alpha Pick

Already boasting a 33.32% year-to-date gain, Wynn Resorts (NASDAQ: WYNN) stock received a further boost on Monday, making it onto Goldman Sachs’ list of equities with the potential to generate considerable alpha this year. In financial terms, “alpha” refers to an asset’s outperformance relative to a benchmark. For example, if Wynn’s stock rises 50% over the course of the year, while the S&P 500 rises by 20%, the gaming stock will have produced 30% worth of alpha.

The stock’s 7% increase over the past week could indicate further gains to come, as market participants turn away from macroeconomic issues and start focusing on company-specific factors. Goldman Sachs measured stocks’ levels of dispersion, which gauges the volatility of an equity and its potential to be moved by specific catalysts rather than macroeconomic issues. Wynn was the only gaming stock featured on the list of 10 highest dispersion scores.

The operator’s fourth quarter results, released last week, were met with enthusiasm by investors. This was due to the strong data from Wynn’s Las Vegas venues, Encore Boston Harbor and its Macau integrated resorts, as well as the 2023 outlook for the company.

It is possible for high dispersion names to experience a decline or remain flat, so investors should tread cautiously. However, should the Macau market continue to rebound, Wynn’s stock could benefit. Stifel analyst Steven Wieczynski reported that, during the Chinese New Year holiday, Wynn’s properties achieved an EBITDA of $4 million per day, and that mass table drop, VIP volumes and retail sales all surpassed pre-pandemic levels.

It is important to remember, however, that even high dispersion names like Wynn are susceptible to macroeconomic headwinds. Should the US enter a recession, it could have a detrimental effect on Wynn’s Las Vegas casinos and Encore Boston Harbor.