Las Vegas Sands Has Catalysts, Momentum, Analyst Says
Date: 2023-07-20 Categories: CASINO
They include Stifel analyst Steven Weczynski, who reiterated his “buy” recommendation for the stock in a note to clients, raising his price target to $78 from $73. The new outlook suggests upside potential of 30.7% from Wednesday's close. Sands operates in Macau and Singapore, which could be positive for the stock as the post-coronavirus recovery in those markets has room for improvement.
Given our belief that the average Chinese citizen is 18 to 24 months behind the average U.S. consumer in terms of post-COVID spending patterns, we believe the Macau and Singapore markets are still in their fourth or fifth recovery,” said Veczynski.
There may be something to this thesis because other analysts predict that July will be Macau's best month in terms of gross gaming revenue (GGR) since January 2020, and that GGR could return to 2019 levels at some point before the end of this year.
Pent-up demand in China is still strong
Macau's recovery began in earnest earlier this year when the Chinese government finally eased coronavirus restrictions that had been in place since 2020.
This signals that the recovery of what was once the world's largest casino market is still in the early stages, and this is borne out by the fact that VIPs have not returned in large numbers. However, this does not contradict the Sands equity thesis because the operator is a favorite among mainstream and premium players. LVS management noted that its Sands China division generated about $200 million in earnings before interest, taxes, depreciation and amortization (EBITDA) last month, which is impressive given that June is usually sluggish in terms of visiting Macau.
“This should tell investors that there remains strong pent-up demand and we expect visits and spending patterns to accelerate towards the end of the year. Secondly, savings rates in China are high, but there are concerns about a slowdown in the Chinese economy,” Wechinski added.
Sands may have some resilience to a slowdown in the US economy, including a potential reduction in consumer spending, as the company has no gambling establishments in the country, Weczynski pointed out.
Given our belief that the average Chinese citizen is 18 to 24 months behind the average U.S. consumer in terms of post-COVID spending patterns, we believe the Macau and Singapore markets are still in their fourth or fifth recovery,” said Veczynski.
There may be something to this thesis because other analysts predict that July will be Macau's best month in terms of gross gaming revenue (GGR) since January 2020, and that GGR could return to 2019 levels at some point before the end of this year.
Pent-up demand in China is still strong
Macau's recovery began in earnest earlier this year when the Chinese government finally eased coronavirus restrictions that had been in place since 2020.
This signals that the recovery of what was once the world's largest casino market is still in the early stages, and this is borne out by the fact that VIPs have not returned in large numbers. However, this does not contradict the Sands equity thesis because the operator is a favorite among mainstream and premium players. LVS management noted that its Sands China division generated about $200 million in earnings before interest, taxes, depreciation and amortization (EBITDA) last month, which is impressive given that June is usually sluggish in terms of visiting Macau.
“This should tell investors that there remains strong pent-up demand and we expect visits and spending patterns to accelerate towards the end of the year. Secondly, savings rates in China are high, but there are concerns about a slowdown in the Chinese economy,” Wechinski added.
Sands may have some resilience to a slowdown in the US economy, including a potential reduction in consumer spending, as the company has no gambling establishments in the country, Weczynski pointed out.
