Shares of Las Vegas Sands (NYSE:LVS) are sagging Thursday, probing the lowest levels since February. That’s after the gaming company released disappointing second-quarter results late Wednesday.
The largest casino operator by market capitalization lost 25 cents a share on the basis of generally accepted accounting principles (GAAP) during the June quarter on revenue of $1.17 billion. Analysts expected a loss of 19 cents a share on sales of $1.37 billion.
The downbeat report is the latest sign of still slow recovery in Macau and Singapore — the company’s two biggest markets. While there are some promising signs in Macau, “pandemic-related travel restrictions continued to impact our performance,” said Sands CEO Rob Goldstein on a conference call with analysts.
Compounding those woes, Marina Bay Sands (MBS) in Singapore is closing today for a “deep cleaning” and will remain shuttered until Aug. 5. Earlier this year, health officials in the city-state said they identified a group of nearly a dozen new coronavirus cases, with each of those individuals either being employees of or visitors to MBS.
Goldstein adds he’s confident Macau and Singapore will recover. But the timing on that matter is murky.
Against the backdrop of Sands soon to have no exposure in the US and the slow, coronavirus-challenged recoveries in Asian markets, analysts are paring estimates on LVS stock. But they’re not abandoning the name outright.
The Macau/Singapore recovery continues to be a slow, painful process, with very little clarity as to when the market will return to normal,” said Stifel analyst Steven Weiczynski in a note. “At this point, we believe it makes sense to be as conservative as possible with our estimates both in the near and long-term.”
His 2023 property earnings before, interest, taxes, depreciation and amortization (EBITDA) forecast of $4.6 billion on LVS is below the company’s estimate of $5 billion to $6 billion. He still has a “buy” rating on the stock, with a $65 price target, implying a 32 percent upside from the July 21 close.
Jefferies analyst David Katz, who rates LVS stock a “buy” with a newly trimmed price forecast of $60, says the name is now a value play.
“The shares have, in our view, become primarily a play on the very gradual recovery and investments in Asia and ramping capital returns over time, rather than the value compounding of past periods. We note the asset durability and cash generation as key attributes,” said Katz.
Short of a rapid recovery in Macau and Singapore, LVS stock may lack for near-term upside sparks, though that scenario could change if Macau’s gross gaming revenue continues trending in the right direction and if a travel bubble with Hong Kong is established.
Looking further out, the company recently said it’s creating an investment unit dedicated to digital gaming — a side of the business the operator has been absent from.
Additionally, Goldstein told analysts on the conference call Sands remains committed to bringing an integrated resort to Texas, and there’s talk of it being involved with a similar effort in Florida, though those are longer-ranging projects.