Las Vegas Sands Is Cheap Quality Stock, Says Goldman Sachs

Posted on: January 13, 2022, 10:31h. 

Last updated on: January 13, 2022, 01:31h.

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

It’s early in 2022, but it’s already clear that there’s division among analysts when it comes to casino stocks. Las Vegas Sands (NYSE:LVS) isn’t immune to that trend.

las vegas
Las Vegas Sands’ Parisian Macau. Goldman Sachs says the casino stock is cheap and high-quality. (Image: Asia Times)

Still, the largest Macau operator has supporters on Wall Street, some of which are growing vocal following a rough 2021. Count Goldman Sachs among the research firms pointing to Sands as a potential 2022 redemption story among casino stocks.

The bank recently released a list of stocks it views as attractively valued, with high-quality traits, based on the bank’s internal metrics, that offer at least 10 percent upside relative to the firm’s price targets. LVS makes the cut.

After four straight years of sharp underperformance versus growth, value staged a comeback in 2021, delivering positive returns for the first time since 2016,” Goldman’s Deep Mehta wrote in a report. “This outperformance of value has come against the backdrop of a rising 10 year (Treasury yield), particularly in 1H21, and we have seen this trend take hold again since the start of December.”

Las Vegas Sands is the only gaming equity on the Goldman list. The shares are up 3.48 percent to start 2022, but reside 42 percent below the 52-week high.

Why It Matters to LVS Investors

It’s January, and this is the time of year when analysts unveil a spate of research, plenty of which includes groupings of stocks predicted to be winners in the year ahead.

Finding casino stocks on those lists isn’t hard these days. But LVS appearing on the Goldman list is relevant for multiple reasons. First, there’s the weight carried by Goldman Sachs research. Second, there’s optimism across the investment community that following the upside generated last year, value stocks — of which Sands is one — can matriculate higher this year.

Finally, there’s the quality element. Like growth, value, and others, quality is an investment factor. But its definitions aren’t as clear as those assigned to its counterparts. However, it has hallmarks, including sound management, strong balance sheets, and an ability to generate cash — all boxes checked by LVS.

The company has some avenues for restoring investor confidence this year. The Venetian and Sands Expo and Convention Center sale will close in the current quarter, meaning $6.25 billion is heading the company’s way. That confirms it has the tools with which to enhance Macau and Singapore venues, while potentially returning capital to investors.

Bold Outlook on this Casino Stock

Goldman is forecasting upside for LVS shares could be as high as 77 percent. The shares currently trade around $38, and the consensus price target is $49.07. It hasn’t traded above $50 since last July.

For any stock, regardless of industry, a lot needs to go right to generate anywhere close to 77 percent upside in a year. In the case of Las Vegas Sands, however, the recipe is clear.

Travel restrictions affecting Macau visitation need to be loosened, and gaming permits there need to be renewed and at terms operators can handle. Specific to LVS, announcing a share repurchase program or restoring its dividend could go a long way toward showing investors management sees value in the stock.