Actions of Las Vegas Sands (NYSE: LVS) have lost 35% in value since March 2021 as the coronavirus pandemic continued to weigh on tourist visits to Macau. Notably, Sands properties in Macau contribute almost 60% of revenues and profits. Thus, the trajectory of Macau’s gambling activity remains the key to a slight uptick in Las Vegas Sands stock. Aided by cost control measures and the suspension of dividends, the company spent just $ 100 million in operating cash in the first six months of 2021, implying that the $ 17 billion decline of the stock’s market capitalization since March 2021 is unjustified. Our interactive dashboard analysis highlights Las Vegas Sands stock market performance during the current crisis with that of the 2008 recession.
Timeline of the 2020 crisis so far:
- 12/12/2019: Coronavirus cases first reported in China
- 01/31/2020: WHO declares global health emergency.
- 02/19/2020: Signs of effective containment in China and hopes of monetary easing from major central banks help S&P 500 reach record high
- 03/23/2020: S&P 500 34% drop of the maximum level observed on February 19, as cases of Covid-19 accelerate outside China. Doesn’t help that oil prices collapse in mid-March amid Saudi-led price war
- From 03/24/2020: S&P 500 recover 100% from lows on March 23, as the Fed’s multibillion-dollar stimulus package removes short-term survival anxiety and injects liquidity into the system.
On the other hand, here is how LVS
Timeline of the 2007-08 crisis
- 01/10/2007: Approximate pre-crisis peak of the S&P 500 index
- 09/01/2008 – 10/01/2008: Accelerated decline in the market corresponding to Lehman’s bankruptcy filing (09/15/08)
- 03/01/2009: Approximate low point of the S&P 500 index
- 01/01/2010: Initial recovery to pre-accelerated decline levels (around 09/01/2008)
Performance of Las Vegas Sands vs S&P 500 during the 2007-08 financial crisis
LVS stock fell from levels of around $ 138 in October 2007 (pre-crisis peak) to levels of around $ 2.28 in March 2009 (as markets bottomed out), which implies that LVS stock has lost 98% from its approximate pre-crisis peak. It recovered from the 2008 crisis to levels of around $ 15 in early 2010 – increasing 555% between March 2009 and January 2010. By comparison, the S&P 500 index initially fell by 51% following the recession before recovering 48% in January 2010..
Low Cash Consumption Rate Highlights Strong Las Vegas Sands Fundamentals
Las Vegas Sands revenue grew 17%, from $ 11.7 billion in 2015 to $ 13.7 billion in 2019, mainly thanks to strong growth in Macau. In addition, the company’s margins fell from 17% to 20%, resulting in significant EPS growth of 42%, from $ 2.47 in 2015 to $ 3.50 in 2019. In 2020, the company observed a 73% (year-over-year) contraction in revenue, reported a net loss. $ 1.6 billion and burned $ 1.3 billion in operating cash. However, the company only burned $ 100 million in the first six months of 2021, thanks to cost controls and the suspension of dividends.
Phases of the Covid-19 crisis:
- Beginning to mid-March 2020: Fear of the rapid spread of the coronavirus epidemic is reflected in reality, the number of cases accelerating in the world
- End of March 2020: social distancing measures + confinements
- April 2020: Fed stimulus suppresses short-term survival anxiety
- May-June 2020: Resumption of demand, with a gradual lifting of confinements – no more panic despite a steady increase in the number of cases
- Since the end of 2020: Weak, but persistent quarterly results demand improvement and advances in vaccine development boost market sentiment
Given historical financial performance, low rate of cash consumption and the likelihood of a recovery in Macau, we believe the stock is poised for long-term gains.
Do Las Vegas Sands Peers Offer Better Payouts? The Las Vegas Sands stock comparison with peers summarizes how LVS stacks up against its peers on the metrics that matter. You may find other useful comparisons on peer-to-peer comparisons.
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