Las Vegas Sands Named Top Q3 Casino Stock Idea by Research Firm

Posted on: September 13, 2022, 02:54h. 

Last updated on: September 13, 2022, 06:07h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The third quarter is drawing to a close, and Las Vegas Sands (NYSE: LVS) is earning some praise as the top casino stock.

LVS stock
Marina Bay Sands in Singapore. seen above. LVS stock is heralded as a winning idea by a research firm. (Image: YouTube)

That’s the sentiment of research firm Bernstein, which is similarly constructive on Sands China — the US parent company’s Macau unit.

LVS and Sands China are our Best Ideas as we close at the end of Q3. We rate both stocks Outperform with a price target of US$53.00 for Las Vegas Sands, and HK$28.00 for Sands China, indicating 39 percent and 62 percent upside, respectively,” said Bernstein analysts in a note to clients.

The $53 price outlook on LVS implies upside of about 36% from the September 12 close. Shares of the largest gaming company by market capitalization are higher by 3% year-to-date, making it one of the best-performing casino equities. That’s while putting the stock well ahead of the S&P 500.

For LVS, Macau Opportunity Remains

The point is that LVS is performing admirably against the backdrop of what’s essentially been a lost nine months in Macau — the company’s largest operating market — and could signal multiple potentially positive factors.

First, the consensus is emerging among analysts that things can’t get any worse in the dominant casino hub in the Asia-Pacific region. While that doesn’t always make for substantial investment ideas, there’s some feeling that Beijing realizes it can’t keep the special administrative region (SAR) locked down forever simply to ward off COVID-19.

“Macau yet remains an attractive entry point with limited downside risk,” added Bernstein.

Although it operates five venues in the SAR, LVS also runs Marina Bay Sands in Singapore. That integrated resort is a source of strength for Sands and represents roughly half the company’s market capitalization by some estimates.

Bolstering the case for LVS and Sands China stocks is the operator’s foothold among mass and premium mass bettors and its lack of exposure to Macau’s battered VIP business.

“Our long-term thesis is driven by expected secular growth in Mass with Sands being well positioned to succeed in both premium mass (especially with new product) and in high margin base mass and retail, where it has always been the top operator,” noted Bernstein.

For LVS, Singapore Salvation

Fortunately for Las Vegas Sands investors, Singapore is taking a more practical approach to reopening. It is dealing with the pandemic better than Macau is, and that’s benefiting Marina Bay Sands.

Singapore’s recovery has taken off with further acceleration forthcoming,” said the Bernstein analysts. “We expect business activity to continue ramping up at MBS during the rest of the year and into 2023. We forecast MBS EBITDA to reach over 90% of 2019 in FY23 and grow from there and set up for a further increase once Phase 2 expansion is completed and drawing in more customers.”

Marina Bay Sands is one of just two gaming venues in the city-state. The other is Genting Singapore’s Resorts World Sentosa. The pair enjoy long-term duopoly protection from the local government.