Las Vegas Sands (LVS) stocks have been dragged down from China and Singapore imposing lockdowns and mobility restrictions to limit the resurgence of COVID-19, and are therefore down around 8% so far this year.
I am optimistic on this title.
But as the current wave of COVID-19 recedes, once again investors’ visibility into the future of the hospitality and entertainment industry is brightening.
There could be a rebound in the stock price, but the timing will also depend on whether market conditions improve from the current bearish sentiment.
Currently, strong headwinds from high inflation, the war in Ukraine, widespread protectionism and the risk of recession are preventing investors from getting back on the stock.
Granted, LVS is cheaper today than it was a few weeks ago.
On TipRanks, LVS scores 8 out of 10 on the Smart Score spectrum. This indicates potential for the stock to outperform the broader market.
About Las Vegas Sands
Las Vegas Sands is the world’s leading developer and operator of world-class integrated resorts.
Its portfolio includes one property in Singapore and five properties in the Macau Special Administrative Region (SAR) of China, in the Western Pearl River Delta on the South China Sea.
The company also states that it is included in the Dow Jones World and North America Sustainability Indexes, while also being recognized by Fortune as one of the World’s Most Admired Companies.
The company’s headquarters are in Las Vegas, Nevada.
First quarter 2022 financial results
Due to travel restrictions in Macau and Singapore to limit the resurgence of COVID-19, Las Vegas Sands saw fewer visitors in the first quarter of 2022 than in the first quarter of 2021.
As a result, revenue fell more than 20% year-over-year to $943 million in the first quarter of 2022, below analysts’ median forecast of around $187 million.
By region, net revenue from Macau operations was $551 million (down 29% year-on-year), while net revenue from Marina Bay Sands operations in Singapore was $399 million (down 6.3% year over year).
In addition to lower revenue, Las Vegas Sands had higher interest expense on outstanding debt compared to the same quarter a year earlier.
The two things combined led to a pro forma net loss of $0.41 in the first quarter of 2022, missing the average analyst estimate of $0.17.
Additionally, consolidated adjusted EBITDA of $110 million for the first quarter of 2022 was 55% lower than the prior year quarter. Capital expenditure amounted to $137 million, of which more than 60% was allocated to Macao and the rest to Singapore.
The future no longer looks as uncertain as it did just weeks ago, when COVID-19 infections erupted again in the People’s Republic of China and other East Asian countries, including Singapore. .
Governments have imposed lockdowns and restrictions to curb the spread of the coronavirus, severely limiting opportunities for Las Vegas Sands and other resort and casino operators to welcome visitors. These measures have been depressing for the businesses of resort and casino operators, as they are highly dependent on customers traffic and tourism.
After about two months of strict restrictions on trade and the free movement of citizens, the situation in various Chinese urban areas, including the Macao SAR, is gradually returning to normal.
Additionally, given the location of the assets, Las Vegas Sands benefits from the Chinese government’s focus on developing the real economy in the Guangdong-Hong Kong-Macau Greater Bay Area.
Analyst earnings growth estimates
Analysts estimate that Las Vegas Sands will increase its earnings per share by 50.80% this year, 431% in 2023 and 265.70% annually over the next few years, from 2023 to 2027.
The financial situation
As of March 31, 2022, the company had unlimited cash balances of $6.43 billion and had access to $3.48 billion of revolving credit facilities, while total debt outstanding was 14 .95 billion dollars.
LVS believes that its financial position is strong enough to support investment activities and cover capital expenditures in Macau and Singapore, while seeking growth by entering new markets.
The Taking of Wall Street
Over the past three months, eight Wall Street analysts have released a 12-month price target for LVS. The stock has a strong buy consensus rating based on six buy ratings and two hold ratings.
The Las Vegas Sands average price target is $48.63, implying an upside potential of 39.10%.
The shares are changing hands at $35.46 at the time of writing for a market cap of $27.10 billion and a 52-week range of $28.88 to $59.59.
The stock price does not look expensive as it is trading below the 50-day moving average of $35.86 and significantly below the 200-day moving average of $38.98.
Currently, the stock price offers a more compelling entry point than just a few weeks ago, increasing the likelihood of a higher return when sentiment turns bullish for the stock.
The lockdown and restrictions continue to affect the financial performance of Las Vegas Sands, reflecting bearish sentiment around the stock price.
Nonetheless, demand for casinos and resorts remains robust in China and Singapore, according to the company’s latest quarterly earnings report.
Stocks could rise as governments lift restrictions on an increasingly weak form of COVID-19.
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