Las Vegas Sands Stock Beaten Up, But Inexpensive

Posted on: December 27, 2021, 10:22h. 

Last updated on: December 27, 2021, 10:50h.

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

Down 35.25 percent year-to-date, Las Vegas Sands (NYSE:LVS) is one of 2021’s most downtrodden gaming stocks. But some market observers believe it’s a name that can’t be ignored.

Marina Bay Sands Singapore
Marina Bay Sands in Singapore. Some investors believe Las Vegas Sands stock will rebound in 2022. (Image: South China Morning Post)

Amid coronavirus travel restrictions and regulatory concerns in Macau — the operator’s largest market — LVS stock fell out of favor with analysts and investors this year. It heads into 2022 as a contrarian idea, and one in search of broader support.

There’s no denying the casino operator is out of favor. Just 47 percent of the Wall Street analysts covering LVS have “buy” ratings on it, according to Goldman Sachs. However, some market participants believe the gaming equity offers potential upside in 2022, and that its valuation is too compelling to ignore.

Las Vegas Sands has really experienced a double whammy this year. Obviously, it’s an entertainment name that’s going to be in trouble due to Covid. But it’s also tied to China. So this stock has really been in the trash heap,” said Joule Financial President Quint Tatro in a recent interview with CNBC.

LVS investors have some things to look forward to in 2022. For example, it is clear that the Venetian and Sands Expo and Convention Center sale will wrap in the first quarter of 2022, 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.

Some Momentum Emerging for LVS Stock

It has a long way to go to regain lost luster and pre-coronavirus pandemic highs. But LVS is showing signs of life to end 2021.

The shares gained almost 10 percent last week, as clarity emerged on the Macau regulatory front. It appears the special administrative region (SAR) will renew the licenses of the six current concessionaires, including Sands, and that the process could start in advance of the June 2022 expiration. Analysts say other proposed regulations, including dividend mandates, are manageable for operators.

Bottom line: Investors are gaining clarity on what’s happening in Macau, and the new regulations aren’t as harsh as originally feared. That could remove some overhang from LVS stock. Plus, the shares are inexpensive.

“I do think travel and gaming will come back,” said Tatro. “This is a stock that looks fairly cheap, has been beaten up, but I think will do well in the coming years.”

Other Levers to Pull

Aside from Macau headwinds abating, Sands has other tools at its disposal with which to bolster investor confidence.

It hasn’t commented on potential acquisitions. But moves to decrease its dependence on Macau — whether by dealmaking or new property development — could be viewed favorably by investors.

Additionally, some analysts believe the operator should signal to investors that the stock is, in fact, undervalued by announcing a major buyback program. Recent indications from the company are that shareholder rewards are on its radar. But it’s balancing that concept with investments in its property portfolio.