In a further example of how the market doesn’t always behave rationally, casino stocks breathed a sigh of relief as investors piled in despite a looming strike in Las Vegas. Three major casino operations, Caesars Entertainment (NASDAQ:CZR), Wynn Resorts (NASDAQ:WYNN), and MGM Resorts (NYSE:MGM) are all up somewhat in Friday afternoon’s trading.
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While most of the world’s attention, as far as strikes go, is focused on the UAW, the Culinary Workers Union Local 226 and the Bartenders Union Local 165 are both poised to cripple Las Vegas’ vital tourism industry. First, there will be a vote, assuming no contract can be ratified by September 26. Then, if the vote passes, a strike follows, and getting a drink or a meal in one of the great culinary centers of the world becomes a whole lot harder. Already, the casinos have engaged in multiple rounds of contract talks, but little has come of it since.
The unions have grand ambitions, noting that they hope to make this “…the best contract ever in the Culinary Union’s history to ensure that one job is enough.” With a string of major events coming to Las Vegas in the next several months—everything from CES in January to an array of sports events—such a disruption could cost millions. However, the unions have a pretty hefty bill waiting in the wings, asking for everything from wage increases to more staff for everything from housekeeping to security.
Meanwhile, all three of the casinos—who stand to lose big if this strike goes through—are looking in solid to excellent shape. Of the three, only Wynn Resorts is a Moderate Buy. The other two are considered Strong Buys by analyst consensus. Nevertheless, analysts expect the most from Wynn Resorts. Indeed, with an average price target of $131.33, WYNN stock offers 38.64% upside potential.
