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A typical resort developed by the company includes accommodation, gambling activities, retail, entertainment, and more.
Las Vegas Sands’ key markets include Nevada, Macau, and Singapore. I am bearish on the stock. (See Las Vegas Sands stock charts on TipRanks)
Recent Performance
The stock is one of the worst-performing on the S&P 500 year-to-date, with a drawdown of more than 34%.
Las Vegas Sands has a history of underperforming the S&P 500, but recent performance has been subdued. Catalysts include lower casino traffic, gambling and leverage regulations in China, and COVID-19 travel restrictions.
Earnings, Debt Concerns
The company released its Q2 financial results in July, where it missed analysts’ revenue estimates by $22 million, due to unexpected Delta pandemic restrictions.
Another worry for the group is the winnings percentage of gamblers in Nevada casinos, which has increased by 20% since 2019. It’s as though the headwinds aren’t fading for the major developer.
As a consequence, Las Vegas Sands now has negative five-year constant annual growth rates across the board, with revenue reading -11.4%. Assets have also decreased by 17.07% over the past five years, while the company’s levered up by 490.50%, with a negative coverage ratio of -1.8.
Valuation and Technicals
I wanted to look at the stock as a pullback buy initially, but the above mentioned debt concerns and the lackluster value metrics changed my mind. It would be no more than speculation to buy this stock at the moment.
Las Vegas Sands’ price to book and price to sales ratios are above the sector average by 276.67% and 417.63%, respectively. Working Capital has grown by 117.25% over the past year due to asset liquidation, and a case could be made for growth through new acquisitions, but headwinds in China mean that the group is likely to spend more on restructuring than acquisitions over the next few years.
Over the past month, the stock’s RSI recovered from the 25 handle to the 50 handle, with many traders buying the pullback. Still, it’s already crept back below 50, and I can’t see any form of momentum building up, with it still trading below its range of moving averages.
Wall Street and Hedge Funds
Wall Street actually disagrees with me and thinks the stock is a Moderate Buy, with an average Las Vegas Sands price target of $53. There have been 3 Buy ratings, 5 Hold ratings, and no Sell ratings on the stock.
The hedge funds’ consensus seems to align with my argument a tad more. Hedge Fund outflows have been severe during the past quarter, with 1.6 million shares being sold. TipRanks’ Hedge Fund tracker indicates that there’s a Very Negative consensus among hedge funds.
Final Word on LVS
Las Vegas Sands has experienced a terrible year, which isn’t set to get any better, as things stand. We will need to see what happens with its China headwinds and capital deployment, before the stock can be deemed a pullback buy.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
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