Here's Why Investors Should Retain Las Vegas Sands (LVS) Now
Las Vegas Sands Corp. LVS is poised to gain from the robust recovery in travel and tourism in Macao and Singapore. The company's ongoing commitment to long-term investments in Macao and the renovation and refurbishment program of Marina Bay Sands bode well for its prospects.
Shares of the company have gained 11.1% in the past three months compared with the Zacks Gaming industry’s growth of 10.6%. The Zacks Rank #3 (Hold) company’s 2024 earnings and sales are likely to witness growth of 48.6% and 19.2% year over year, respectively. However, high debt and stiff competition remain a concern.
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Let’s discuss the factors that suggest why investors should retain the stock for the time being.
Major Growth Drivers
Macao Business to Drive Growth: Las Vegas Sands (LVS) derives a significant revenue share from Macao, having invested over $15 billion in the region since 2004. The company's consistent contributions to Macao's diversification and appeal as a business and leisure tourism destination are notable.
LVS’ impressive long-term commitment of $3.8 billion investment in Macao through 2032, especially in non-gaming, has positioned it impressively well for delivering solid growth in third-quarter 2023. The growth was primarily driven by an increase in market visitation along with travel and tourism recovery. Macao's visitation during the quarter reached approximately 85% of the 2019 level.
Impressive Visitation Recovery: Las Vegas Sands has witnessed impressive growth trends after the easing of travel restrictions. In the third quarter of 2023, the company reported a significant growth in property visitation, gaming volumes, retail sales and hotel occupancy in the Macao region. Visitation in China (excluding Guangdong province) reached approximately 72% of the 2019 visitation level in the quarter. The relaxation in travel restrictions and an increase in flight capacity have ensured the continuous recovery of market visitation. With the easing of restrictions and recovery in travel and tourism, the company anticipates generating strong cash flows from the region in the days ahead.
Emphasis on the Singapore Market: Las Vegas Sands also witnessed a remarkable recovery in travel and tourism in Singapore. The company's strategic decision to continue investing in Marina Bay Sands (MBS) contributed significantly to its strong growth. In the third quarter of 2023, MBS achieved robust growth in both gaming and non-gaming segments despite ongoing airlift constraints, primarily from China.
The MBS renovation and refurbishment program added to the growth momentum of the company. As of Sep 30, 2023, the company introduced around 1,200 redefined rooms, including about 300 new luxurious suites in MBS. Certain other improvements in gaming, dining, entertainment and retail offerings were made alongside.
Concerns
Las Vegas Sands’ growth momentum is hindered by its high debt position. Given the ongoing economic uncertainties, maintaining sufficient liquidity has become a herculean task for the company. As of Sep 30, 2023, total debt outstanding (excluding finance leases and financed purchases) was $14.17 billion compared with $14.7 billion as of Jun 30, 2023. Although the debt level was sequentially lower, it is still on the higher side compared with LVS’ cash balance. As of Sep 30, unrestricted cash balances amounted to $5.57 billion, down from $5.77 billion reported in the previous quarter.
Heightened competition in Las Vegas and Macao markets has intensified due to increased hotel openings and promotional activities. This could potentially lead to a reduction in the company's market share, particularly in the Macao market, due to excess supply.
Key Picks
Here are some better-ranked stocks from the Zacks Consumer Discretionary sector:
Virco Mfg. Corporation VIRC sports a Zacks Rank #1 (Strong Buy). VIRC has a trailing four-quarter earnings surprise of 188.6% on average. VIRC’s shares have surged 161.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VIRC’s 2024 sales and earnings per share (EPS) indicates a rise of 15.7% and 32.4%, respectively, from the year-ago period’s levels.
Stride, Inc. LRN carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 44.3% on average. Shares of LRN have increased 77% in the past year.
The Zacks Consensus Estimate for LRN’s 2024 sales and EPS indicates a rise of 10.8% and 34.7%, respectively, from the year-ago period’s levels.
Bluegreen Vacations Holding Corporation BVH flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 29.4% on average. Shares of BVH have increased 187.6% in the past year.
The Zacks Consensus Estimate for BVH’s 2024 sales and EPS indicates a rise of 1.5% and 22.6%, respectively, from the year-ago period’s levels.
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Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
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Bluegreen Vacations Holding Corporation (BVH) : Free Stock Analysis Report
