Las Vegas Sands Still Favored by Analysts Despite Weak Q2 Results

Posted on: July 23, 2020, 09:49h. 

Last updated on: July 23, 2020, 11:27h.

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

Shares of Las Vegas Sands (NYSE:LVS) are trading lower today, a day after the company reported a wider-than-expected second-quarter loss and a revenue decline of 97.1 percent. But some sell-side analysts are still bullish on the stock.

Las Vegas Sands Still Backed By Some Analysts
The Venetian Macau, one of the venues essential to Sands’ rebound hopes. Analysts support the stock despite weak Q2 earnings. (Image: South China Morning Post)

An adjusted loss of $1.05 a share on revenue of just $98 million was the result of Sands operating against a trying coronavirus backdrop, including harsh travel controls in Macau — its most important market — and its Las Vegas and Singapore venues being closed for much of the June quarter.

With Macau and Singapore combining for approximately 85 percent of its revenue in a given year, LVS needs some clarity on when travel in the Asia-Pacific region will get back to normal. That’s something it’s currently unable to offer analysts and investors.

The company could not provide any definitive answers to the two questions on everyone’s mind: 1) When will China further ease travel restrictions/commence visa issuance to Macau? and 2) When will foreign travel to Singapore resume in earnest?,” said Stifel analyst Steven Wieczynski in a note out Thursday.

The China visa issuance the analyst is referring to is the individual visit scheme (IVS), a permit used by nearly half of the visitors to Macau last year from mainland China.

Macau Matters

Macau, where LVS runs five integrated resorts, is a vital engine for the company’s results and is all the more important at a time when Las Vegas is struggling.

Sin City, where Sands owns the Venetian and the Palazzo, is “in a world of hurt” and a “difficult place to be” at the moment, said LVS executives on the earnings conference call. Roth Capital analyst David Bain points out that group business traffic “is in a bad place” and will likely remain that way for some time. That depresses weekday occupancy and play rates, said the analyst.

Conversely, Bain notes that Macau is one of a small number of gaming markets in the world that could repeat 2019 figures as soon as next year.

“Macau names represent one of the few large, liquid gaming segments that could repeat CY19 in CY21,” said the analyst. “That said, expectations are now below that, creating a setup for believers.”

LVS said it’s moving ahead with plans to spend $5 billion enhancing its five Macau venues and the Marina Bay Sands in Singapore, which it expects will break even this month after reopening July 1.

Maybe Time to Buy?

With more than $3 billion in cash, giving it one of the industry’s strongest balance sheets, and shares that are still depressed because of the pandemic, LVS could be an ideal wager for investors looking to bet on Asia-Pacific gaming markets rebounding more rapidly than Las Vegas.

“All told, we continue to encourage investors to take advantage of the current dislocation in LVS shares, resulting from the uncertainties facing its two largest operating markets, by adding to existing positions or initiating new positions for the longer term,” said Wieczynski.

He reiterated a “buy” rating on LVS stock with a $64 price target, slightly below his previous forecast of $65. Roth Capital’s Bain said if investors liked LVS going into the earnings report, nothing happened that should alter that view. He rates the name a “buy,” with a $52 estimate.