Las Vegas Sands Corp. (LVS) Looks Cheap At Current Levels


Las Vegas Sands Corp. (NYSE:LVS) finds itself in a tight spot, marred with mixed sentiments concerning its long-term prospects. The company helped establish Nevada and Macau as the epicenter of gambling in the world. But things have changed, as the company continues to feel the effects of competition and slowing economy. A slowdown, especially in Macau which it on relies for a good chunk of its revenue, has all but sent the stock tumbling in the market.

Expected Improvement from Macau

Could things be finally looking up for Las Vegas Sands Corp. (NYSE:LVS) in Macau? That is a question that continues to juggle the minds of many investors. Macau is an important marketplace for Las Vegas Sands’ revenue, and anything that happens here has a direct effect on the stock’s performance. A decline in revenues from this gaming epicenter continues to elicit concerns but with the hope that things could finally be looking up.

The company enjoys the advantage of commanding a big presence in the area compared to other players that are still completing major projects. Las Vegas Sands Corp. (NYSE:LVS) remains well positioned to benefit a great deal from any improvement in terms of returns from Macau, as other companies await approval for their projects. Any improvement is expected to spur interest in the company, something that could have an impact on the stock price.

Las Vegas Sands Expansion Plans

CEO, Sheldon Adelson, has already reiterated the need to diversify the company’s marketplaces. The move is expected to shield the company from the effects of a further slowdown of business in Macau. Las Vegas Sands Corp. (NYSE:LVS) is now looking to expand into other markets in Asia, where demand for what it has to offer remains high. Japan, Korea, and Vietnam are believed to be possible areas that the company would look to invest. The countries have already shown their willingness to open up their casino gaming marketplace.

Having already shown the vision and ability to execute on new casino concepts; there is no doubt that a venture into new markets will be a success for the company. Singapore is just a reflection of the amount of success and growth that Las Vegas Sands Corp. (NYSE:LVS) has attained over a short period beyond Macau

Growing Gaming Market in the US Could Trigger Stock Upside Momentum

A 37% decline in revenue in May, from Macau, was substantially offset by the company’s huge presence in Nevada. Las Vegas has continued to shield the company from the effects of over-relying on earnings from Macau.

The economic market in the US continues to improve, attracting more people into Las Vegas Sands Corp. (NYSE:LVS)’s casinos in the country. The US gaming market, as well as expansion into other areas, could turn out to be key in the company finding its way on the financial front.

Increased airline capacity to Las Vegas is already having an impact on the US gaming capital that posted its best April sales of $498.8 million this year. Accruing a bigger piece of the pie in Las Vegas, as well as gaining traction with the ongoing expansion into other marketplaces, should allow the stock to rediscover its upward momentum

An increase in disposable income for people in Mainland China is also expected to benefit the entire gaming industry in Macau. Such improvement should result in an increase of VIP traffic into Las Vegas Sands Corp. (NYSE:LVS) casinos expected to catapult the stock’s upward movement.

Effects of New Casino Openings in Macau

Las Vegas will still have to bypass a string of challenges if it is to rediscover itself and affirm its position in the gaming industry. New casino openings, more so in Macau, continue to pose the biggest threat to the company’s prospects in China.

The Las Vegas market share and mass appeal continue to be under immense pressure. Increase in supply in Macau would work to the existing player’s advantage as terms of increased demand continues to be questioned.

Macau is at the edge in terms of returns as a series of anti-graft measures, as well high-profile arrests of senior Chinese officials, continues to affect revenue streams. The entry of more players is only making the situation worse in terms of revenue generation for the current players. The effects of the opening up of the second phase also continue to be felt. New openings are only cannibalizing the already suppressed gaming market.

Galaxy has already confirmed it intends to target the mass market aggressively. Such a move could have detrimental effects on Las Vegas Sands, which has seen its market share drop. A decline in market share to 20.2% in June, from highs of 26.5% in May, continues to elicit further doubts on the company’s prospects, especially in Macau.

Weaknesses in the Gaming Industry

Investors have also been extremely optimistic that Macau is on a recovery path. Investment firms are already suggesting that they may be forced to lower their full-year estimates as things look uncertain, especially on the upside as initially thought

Macau, showing no signs of growth after a year of a steep decline in terms of revenue returns, is expected to elicit further concerns on Las Vegas Sands Corp.(NYSE:LVS) prospects. Earnings results for this month are already showing that the gaming industry has not yet stabilized and that things could go south.

Las Vegas earnings for the second half of the year could be dealt a major blow on Macau gaming earnings failing to rebound. Earnings for June are expected to come in at $2.2 billion, down from an earlier estimate of $3.3 billion.

Inherent Risks

Although Las Vegas Sands Corp. looks interesting, the lack of visitors coming down to Macau and participating in its casinos is based on assumption which could go either way. The key factor for companies will be an increase in participation of people from China. If that number goes up from the current 1 percent then it will be an interesting play.

Conclusion

A further decline in revenues from Macau is something that Las Vegas Sands Corp. (NYSE:LVS) does not need at the moment. However, that could be the end result as authorities in the region continue to impose strict visa restrictions that are already compounding the effects of a weak economy in the region.

There is room for Las Vegas Sands Corp. (NYSE:LVS) stock price movement, but the direction remains the biggest concern for many investors. Growth in Mainland China, as well as the easing of restrictions in Macau, could propel the stock higher in the charts.

However, a further slowdown of the economy and the entry of more players in the business could have huge repercussions on the stock’s upward momentum.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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