Today is shaping up negative for Las Vegas Sands Corp. (NYSE:LVS) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the latest downgrade, the 17 analysts covering Las Vegas Sands provided consensus estimates of US$5.0b revenue in 2020, which would reflect a concerning 42% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$1.39 per share in 2020. However, before this estimates update, the consensus had been expecting revenues of US$6.9b and US$0.38 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target was broadly unchanged at US$58.26, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Las Vegas Sands analyst has a price target of US$73.00 per share, while the most pessimistic values it at US$49.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 42% revenue decline a notable change from historical growth of 1.5% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 20% next year. It's pretty clear that Las Vegas Sands' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Las Vegas Sands. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Las Vegas Sands after the downgrade.
That said, the analysts might have good reason to be negative on Las Vegas Sands, given its declining profit margins. For more information, you can click here to discover this and the 2 other concerns we've identified.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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