Why Wynn Resorts' Nasdaq-100 Exclusion Masks Its Undervalued Potential

The removal of Wynn Resorts (WYNN) from the Nasdaq-100 index in April 2017, now nearly a decade ago, was a technicality rather than a reflection of the company's underlying strength. Stripped from the index because TripAdvisor (TRIP) failed to meet weight requirements—a reason unrelated to Wynn's own performance—the exclusion highlights a disconnect between passive indexing mechanics and the true value of the company. Today, as Wynn navigates recovery from pandemic disruptions and expands into new markets, investors may be overlooking its undervalued position and growth catalysts.

The Exclusion: A Technicality, Not a Judgment

On April 24, 2017, Wynn Resorts was removed from the Nasdaq-100 index alongside TripAdvisor. The trigger? TripAdvisor's stock had fallen below the index's 0.1% minimum weight requirement over two consecutive months. Wynn was replaced in the index as part of a routine rebalancing, even though its own fundamentals were not the issue. This distinction is critical: the exclusion was a byproduct of another company's struggles, not Wynn's performance.

The Disconnect: Stock Performance vs. Fundamental Value

Since its Nasdaq-100 exclusion, Wynn's stock has faced volatility tied to broader macroeconomic and industry-specific challenges—most notably the pandemic's collapse in travel demand. But stripped of index inclusion, the stock has also been stripped of the passive buying that comes with being part of widely tracked benchmarks. This dynamic may have artificially suppressed its valuation.

While the Nasdaq-100 has surged nearly 200% since 2017, WYNN's stock has lagged, rising only 50% over the same period. Yet, the company's fundamentals have held up remarkably well. Pre-pandemic, Wynn reported consistent revenue growth in its core Las Vegas and Macau markets. Post-pandemic, it has aggressively diversified into markets like the UAE, where its new Al-Marjan Island casino-resort—opening in late 2025—could tap into a high-growth, regulated gambling market.

Undervalued Now, Positioned for Growth

Today, Wynn trades at a P/E ratio of just 12x forward earnings, well below its five-year average of 18x and significantly cheaper than peers like Las Vegas Sands (LVS) at 22x or MGM Resorts (MGM) at 15x. This discount appears unjustified given Wynn's strategic moves:

1. UAE Expansion: The $1.4 billion Al-Marjan Island resort, set to open in 2025, offers access to a market with rising disposable income and relaxed gambling laws. The UAE's regulated casinos are expected to generate $1.5 billion in annual revenue by 2030.
2. Cost Discipline: Post-pandemic, Wynn has reduced debt and prioritized capital efficiency, with a net debt/EBITDA ratio of 1.5x—healthier than many peers.
3. Macau Recovery: Macau's gaming revenue is rebounding as travel restrictions ease, with Wynn's market share holding steady at ~10% in 2023.

Risks and the Case for Caution

No investment is without risk. Wynn's leverage to China's economic recovery remains a wildcard, as does the pace of Macau's rebound. Additionally, the UAE project's success hinges on execution and competition from other luxury resorts. Still, at current valuations, the stock appears priced for further setbacks, not growth.

Investment Thesis: A Contrarian Play on Recovery

For investors with a 3-5 year horizon, Wynn offers a compelling contrarian opportunity. The stock's exclusion from passive indexes may have created a buying opportunity, especially as the company executes on its UAE expansion and benefits from a cyclical rebound in travel and leisure.

Key Catalysts to Watch:
- Q4 2025: The UAE resort's opening and early revenue figures.
- Macau's Q2 2024 Earnings: A key indicator of demand recovery.
- Debt Reduction: Wynn's ability to deleverage further amid rising rates.

Final Take

Wynn Resorts' Nasdaq-100 exclusion was a technical footnote, not a verdict on its business. Today, the stock's low valuation and high-growth UAE project position it as a rare value play in the beaten-down gaming sector. For investors willing to look beyond index mechanics, WYNN could be a hidden gem.

Investment recommendation: Consider a gradual position in WYNN, with a price target of $90–$100 by 2026, contingent on UAE success and Macau recovery. Maintain a watch on geopolitical risks in key markets.