Las Vegas Sands Corp. (LVS Quick QuoteLVS - Free Report) is poised to benefit from growth in Macao and Singapore, driven by investments focused on enhancing the business and delivering top-tier customer experiences. Travel recovery and improving tourism spending are encouraging for prospects in Macao.

LVS’ ongoing commitment to long-term investments in Macao and the renovation and refurbishment program of Marina Bay Sands bode well for its prospects. However, high debt and stiff competition are a concern.

Factors Driving Growth

LVS generates a significant portion of revenues from Macao. The company’s long-term commitment of $3.8 billion investment in Macao (through 2032), especially in non-gaming, positioned it impressively to deliver solid growth in the first quarter and full-year 2024. The upside was primarily driven by an increase in market visitation along with travel and tourism recovery.

The Macao market continues to grow. During second-quarter 2024, total gaming revenues increased 24% year over year. Mass play revenues also saw a 29% year-over-year rise. The outlook for Macao remains positive, with expectations for gross gaming revenues to surpass $30 billion next year and continue growing annually. LVS' strategy focuses on investing in high-quality assets and achieving scale, to strengthen its position in Macao's competitive market. This approach is designed to maintain market leadership and drive long-term growth, delivering substantial EBITDA and strong returns on invested capital.

The company, which shares space with Red Rock Resorts, Inc. (RRR Quick QuoteRRR - Free Report) , PENN Entertainment, Inc. (PENN Quick QuotePENN - Free Report) and MGM Resorts International (MGM Quick QuoteMGM - Free Report) , is also benefiting from splendid travel and tourism recovery in Singapore. In second-quarter 2024, the Marina Bay Sands (MBS) achieved strong financial and operating performance driven by high-quality investments in market-leading products and growth in high-value tourism. The management’s decision to continue investing in MBS, Singapore, added to its solid growth.

In the reported quarter, the rolling volumes in Singapore were $6.1 billion, up 1% year over year. Mass gaming wins at MBS were $604 million, up 4.1% from $580 million reported in the year-ago quarter. The company is well positioned for growth with new suite products and elevated service offerings as travel and tourism spending in Asia continues to advance.

The MBS renovation and refurbishment program added to the growth momentum of the company. In Phase I, the company introduced 1,300 redefined rooms, including about 390 new luxurious suites in MBS.

The company also initiated the next phase of its capital investment program at Marina Bay Sands. A $750-million renovation is underway, including Tower 3, set to be completed by second-quarter 2025. This phase will add 544 redesigned rooms, with 385 new suites. Upon completion of both phases, the resort will boast 1,844 redesigned rooms, including 775 suites.

The company will introduce tower gaming at Marina Bay Sands in third-quarter 2024. The next phase of the capital investment program at Radio-based Sands is set to be completed in second-quarter 2025. This will support further growth in 2025 and beyond.

Concerns

Las Vegas Sands’ growth momentum is hindered by its high debt position. Given the ongoing economic uncertainties, maintaining sufficient liquidity has become an arduous task for the company. As of Jun 30, 2024, the total debt outstanding (excluding finance leases and financed purchases) was $13.72 billion compared with $13.94 billion as of Mar 31, 2024. As of the second quarter, unrestricted cash balances amounted to $4.71 billion, down from $4.96 billion reported in the previous quarter. Although the debt level was sequentially lower, it is still on the higher side compared with the company’s cash balance.

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.

Las Vegas Sands carries a Zacks Rank #3 (Hold) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Brief Review of the Other Stocks

Red Rock Resorts is benefiting from strong visitation and solid spending per visit across its portfolio. The company emphasizes cost-saving initiatives and development pipelines to drive growth. During first-quarter 2024, the company focused on strategic investments to enhance guest amenities and drive incremental visitation.

Given the successful openings of high-limit tables and slot rooms, a new casino bar and a restaurant, the company is optimistic. An uncertain economic environment and elevated cost pressures are a concern. The company intends to focus on cost controls and price adjustments to counter the same.

PENN Entertainment is benefiting from consistent business strategies and strong brand recognition. Through various acquisitions and divestitures, its presence became largely widespread. Even then, PENN Entertainment is continuing to expand and leverage its brand power.

Furthermore, PENN Entertainment emphasizes reimaging its properties with best-in-class retail sports books, new games, enhanced technology, refreshed hotel offerings and new third-party restaurant concepts to drive growth.

MGM Resorts is benefiting from increased business volume and travel activity at MGM China and luxury resort properties in Las Vegas. Alongside, sports betting and iGaming continue to be top growth drivers for the company.

Also, the company’s focus on international expansion, asset-light strategy, and non-gaming activities bode well. The company holds an optimistic outlook for its Las Vegas segment's performance moving forward. However, macro challenges and high costs remain as core headwinds.