Las Vegas Sands named top casino stock idea by Morgan Stanley
Shares of Las Vegas Sands Corp. (NYSE: LVS ) are up 26.77% year to date, highlighting a surprising coincidence with Macau's recovery. Some analysts believe the stock is poised for further gains.
In a new client note, Morgan Stanley analyst Stephen Grambling named Sands Corp. the company's top casino stock - an announcement that comes ahead of the company's scheduled July 19 It was announced ahead of Wednesday's second-quarter earnings report. Sands China operates five casino resorts in Macau, a key factor behind Wall Street's positive view on the stock.
LVS has historically targeted mass market leaders, holding about 25% of the market share before the COVID-19 crisis, and is expected to continue operations as the company invests $2 billion in two properties in Macau during the pandemic This share will increase over time. Grambling noted: "LVS' other key asset in Singapore continues to generate positive trends while maintaining a pristine balance sheet (<1x 2024 net debt/EBITDA) and ~$6.5 billion as of end-Q1'23 cash."
Analysts have an "overweight" rating on Sands Corp. with a $71 price target. That’s a 16.3% increase from the July 14 closing price and just above the consensus price forecast of $69.78.
"The best way to play Macau"
Sands is one of six franchises in Macau, and overall, the group is delivering performance for investors. The gaming industry in the Special Administrative Region (SAR) is recovering from three years of punitive coronavirus restrictions imposed by the Chinese Communist Party (CCP).
The performance of this group of casino stocks is not linear. But given Sands' ability to capture and grow market share among mass and premium mass players (while VIP recovery remains weak), the brand has the potential to become a front-runner among Macau stocks.
“We believe this is the best way to play Macau and one of the ultimate consumer recovery stories post-COVID-19,” Grambling noted.
As for catalysts for Sands in the second half, Macau's gross gaming revenue (GGR) could return to 2019 levels at some point this year, which could be a legitimate spark. The indicator was close to 65% of pre-COVID levels last month.
Sand’s Solid Casino Stock Ideas Beyond 2023
Grambling also pointed to continued strength in Singapore's Marina Bay Sands, Sands' only location outside of Macau, as contributing to the stock's performance in the second half of 2023. Now that the calendar is already well into July, it may only take a short time for analysts and investors to start looking at assessing catalysts for Sands in 2024.
As Grambling noted, this could include reinstating the company's dividend that has been suspended since 2020, announcing a stock buyback plan, and possibly winning one of the three New York City-area casino licenses that will be issued.
Sands Corp., previously a major dividend payer in the gaming industry, has said executives would prefer to resume share buyback distributions. But that view may change. Additionally, the operator may need approval from some creditors to resume dividends.
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Source: www.casino.org
