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Bear of the Day: Las Vegas Sands (LVS)

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Las Vegas Sands (LVS - Free Report) is a Zacks Rank #5 (Strong Sell) that is runs resorts and casinos in the U.S. and Macao. While stocks like PENN and DKNG rip as the sports betting trend goes to mobile, Las Vegas Sands struggles in the COVID environment.

While the stock performance is a red flag, when investors look closer at the fundamentals, they should be even more concerned. Last quarter’s revenues were a big disappointment, which led analysts to lower estimates. Additionally, the pandemic is preventing casinos from getting their typical traffic.

About LVS

Las Vegas Sands operates The Venetian Resort Hotel Casino on the Las Vegas Strip; and the Sands Expo and Convention Center in Las Vegas, Nevada. Additional properties include The Venetian Macao Resort Hotel, the Sands Cotai Central, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao in Macao, the People's Republic of China; and Marina Bay Sands in Singapore.

The company was founded in 1988, is headquartered in Las Vegas, Nevada and employs 50,000 fulltime employees.

Las Vegas Sands has a market cap of about $35 Billion and has Zacks Style Scores of “F” in Growth and “C” in Value.

Earnings

The company actually reported an EPS surprise beat of 62%. Normally, investors would buy a stock up on a beat like that, but the stock traded lower. Revenues came up very short of the expected $739M, with only $98M reported.

The pandemic is obviously hurting gaming, but the resorts are seeing empty occupancy. Rates at Venetian Macau was at 2.1% vs 93.9% last year. For Sands Cotai, occupancy was as 1.1% vs the 94.8%.

Estimate Revisions.

The poor quarter is not the fault of management or anything wrong the company has done. It is of course the pandemic that is hurting the business. With government mandated shutdowns and the fear of travel still in the air, casinos and hotels are simply not desirable places to be. Until there is a perception that travel and being around crowds is safe again, the company will struggle.

For these reasons, we are seeing analyst take down earnings estimates. Over the last 30 days, the current quarter estimates have fallen 25%, from -$.36 to -$.45. Things will improve next year, with estimates falling only 2.3% over that same time frame. However, investors should be aware that these estimates assume that the pandemic is in the rear-view mirror.

Stock Performance and Technical

Looking at the performance of gambling stocks a couple names stick out. Let’s look at some big names and what they have done since in 2020:

DKNG: +260%

PENN: +170%

BYD: +6%

CZR: -5%

MGM: -35%

LVS: -36%

WYNN: -48%

One thing sticks out when looking at these returns: Mobile Betting. The legalization of sports betting in 18 states has allowed a shift of the action out of vegas into companies that can have books in those states. Both DraftKings and Penn National have moved quickly and their stocks have hit big.

For LVS and other traditional names, they just get back to normal until COVID is gone.

In Summary

It should be obvious to investors that LVS is dead money right now. The question is if they are worth the risk at current levels and the answer seems to be no. Why sit in a stock that will be tortured by the virus when the money can be put to work in the companies thriving in these times. Until there is a change in the atmosphere, the odds are not the favor of Las Vegas Sands


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Las Vegas Sands Corp. (LVS) - free report >>