Las Vegas Sands Still Preferred Way to Play Macau Rebound

Posted on: July 5, 2021, 12:01h. 

Last updated on: July 5, 2021, 08:36h.

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

Las Vegas is abuzz with activity again, and regional casinos have long since shaken off the effects of the coronavirus pandemic. But Macau is lagging, pressuring some of the largest gaming equities in the process.

LVS stock
The Parisian Macau. An analyst believes LVS stock can bounce back. (Image: Getty Images)

Down 11 percent year-to-date, Las Vegas Sands (NYSE:LVS) is part of that group, and with the world’s largest gaming center coming off a month-over-month gross gaming revenue (GGR) decline of 37 percent in June — the worst monthly showing this year — it’d be reasonable to expect some analysts would advise avoiding Macau-centric stocks, particularly against the backdrops of lingering travel restrictions and a recent uptick of coronavirus cases in mainland China.

Given the uncertainty around the market over the next couple of months, we believe it makes sense to become more conservative with our estimates,” said Stifel analyst Steven Wieczynski in a recent note. “For the most part, our Macau estimates are being lowered to account for higher virus case counts and delays around easing of travel rules between Hong Kong and Macau, as well as other areas inside of Mainland China.”

The analyst remains enthusiastic on LVS stock on a long-term basis. He also notes that there’s near-term potential with the name, because Macau visitation patterns surge when travel restrictions and health protocols were previously eased.

LVS Stock Could Use Macau Rebound

Sands runs five integrated resorts in the special administrative region (SAR), making it the largest operator there and emphasizing the importance of Macau to the company’s top and bottom lines.

While LVS stock is lower by 6.5 percent over the past month, some recent data points suggest traders are betting that the largest gaming company by market capitalization is poised to rebound. Adding to the case for the shares is Sands possessing dominant shares among Macau’s mass market players — a positive at a time when VIPs remain leery of spending too heavily.

“Given our expectation for continued outsized growth within Macau’s mass market gaming segment once this virus noise dies down, we continue to favor exposure to Macau’s most dominant mass market player, Las Vegas Sands, and would be using the recent weakness to accumulate shares of this name for the long-term,” adds Wieczynski.

Reasons to Love Las Vegas Sands

For investors that can stomach that fits and starts of the Macau recovery, LVS stock remains a compelling bet among gaming equities.

“Although we expect lingering Chinese macroeconomic uncertainty and virus fears to elevate trading volatility in the near term, we see nothing out there at this point capable of tempering our long-term enthusiasm,” notes Wieczynski. “We believe LVS’ unrivaled scale and investments for the future position its Macau business to remain a leader in the world’s premiere gaming market for the foreseeable future.”

Additionally, LVS sports one of the industry’s strongest balance sheets — one that’s being fortified with proceeds from the sale of the company’s Las Vegas assets.

“Additionally, the company’s impeccable balance sheet not only adds a level of safety and security to the story, but also favorably positions the company to successfully pursue any global integrated resort development opportunities of size that come along in the future, in our view,” adds the analyst.