Las Vegas Sands Stock Reassessed by Analyst Following Stumble

Posted on: October 4, 2023, 03:14h. 

Last updated on: October 4, 2023, 08:23h.

Like the broader complex of gaming equities, Las Vegas Sands (NYSE: LVS) has been mired in a multimonth slump that’s prompting at least one analyst to reassess their views on the largest casino stock by market capitalization.

Visitors outside Parisian Macau. An analyst cut operator Las Vegas Sands’ price target cut. (Image: Anthony Kwan/Bloomberg)

In a note to clients on Wednesday, Deutsche Bank analyst Carlo Santarelli lowered his price target on the Marina Bay Sands operator to $65 from $72. However, that new forecast implies upside of almost 48% from current levels. He maintained a “buy” rating on the stock.

LVS shares are down ~30%, versus a 13% decline in the Hang Seng Index (HSI) and a 3% gain in the S&P 500 (SPX), over the same time frame,” wrote the analyst. “The bulk of the sell off in LVS shares, however, took place over the August and September period, as shares have fallen ~24% since the end of July, while the HSI index and the SPX Index are down 14% and 7%, respectively.”

Following a scintillating start to 2023 in which the shares surged through the first five months of the year, Las Vegas Sands stock has struggled in recent months. That includes a 16% slide over the past month, including a tepid September gross gaming revenue (GGR) report in Macau.

Still a Case for Las Vegas Sands Stock

Due to inclement weather, the soft September GGR out of Macau, Sands’ largest market, was widely expected. Still, some investors may view recent weakness in Las Vegas Sands as too harsh a correction.

“Given the sharpness of the move lower, we felt it appropriate to reconsider our broader thesis around the Macau recovery and the positioning of LVS within the market recovery,” added Santarelli.

While macro fears in China’s economy — the world’s second-largest behind the US — are weighing shares of Macau operators, some analysts believe that factor is priced into stocks, including Sands. That could signal bargains in the group are available today. Plus, the 2023 GGR in Macau will likely be stronger than expected at the start of the year.

Standard & Poor’s estimated GGR will reach 85% to 90% of pre-coronavirus levels this year, up from a prior forecast of 75% to 85%. S&P sees a full recovery in 2024. That’s particularly meaningful to Sands, which, along with rival Galaxy Entertainment, is a leader among mass and premium-mass bettors who visit Macau.

Ingredients for LVS Rebound

With the stock down 32.64% from its 52-week high — a bear market and then some — it might be difficult for some investors to be enthusiastic about Las Vegas Sands at this juncture.

Still, the operator runs some of the most profitable casino resorts in the world, and it has avenues through which it can generate tailwinds to foster renewed confidence among investors.

“Since the true opening of the market in January of this year, we have believed the following: 1) LVS would benefit from margin improvement, though this would be lesser than that of peers, given the pre-pandemic mass mix of the Company, relative to peers, 2) LVS would extract costs from the operations that would be unlikely to return, and 3) given competitor supply additions on Cotai and the gradual increase in visitation,” concluded Santarelli.