In a move signaling confidence in the gaming sector’s resilience, Las Vegas Sands, the industry titan with an impressive market presence, has been selected by Deutsche Bank for inclusion on their coveted “Fresh Money List” as the first quarter of 2024 unfolds. The esteemed list comprises stocks in which the research firm has anchored its high convictions as the new year gains momentum—underscoring an optimistic forecast for the sector.
As the holding company behind the iconic Marina Bay Sands resorts in Singapore, Las Vegas Sands stands as the solitary representative of the gaming fraternity amidst nine other consumer stocks to secure a position on the list. Amidst an array of bullish sentiments, Las Vegas Sands has captured the spotlight as a top gaming pick for 2024 by Wall Street, even though its shares have witnessed a modest uptick of 1.73% year to date—a stark contrast to the robust 24.31% returned by the S&P 500.
“We see considerable value in LVS shares at current levels, and believe some of the concern around the trajectory of the recovery in Macau is misguided, with too much being read into short-term data points,” remarked the analyst at Deutsche Bank, Carlo Santarelli, in a recent report. He went on to foresee a potential normalization of the situation, framing Las Vegas Sands as an enticing investment proposition from fundamental and valuation standpoints.
Santarelli expressed a positive view on Macau’s growth prospects, considering its appeal for investors with domestic consumer-heavy portfolios. Currently, Las Vegas Sands operates no casino hotels in the U.S., potentially a strategic advantage during a time when reduced wagering-related expenditures are anticipated for American consumers next year.
Despite the headwinds faced by China and Macau—including lingering apprehensions related to the repercussions of China’s coronavirus protocols—there is a silver lining. The Macau market shows signs of a robust revival, yet the stock prices of the concessionaires in the region, including Sands China, appear to be under strain, with most suffering significant setbacks and only MGM China holding onto a slender profit. These undervalued stocks, trading at low earnings multiples, suggest market trepidation about high property investment levels by the operators and the potential impact of a sluggish Chinese economy on gaming expenses. However, according to Santarelli, these factors are already weighed and acknowledged in the investor sentiment.
“Clearly, the growth outlook offered by the Macau-oriented stocks has not been catalytic in drawing investors recently. Yet we believe the market outlook remains largely unchanged, positioning LVS shares as an alluring investment opportunity,” the analyst added.
Santarelli conceded that Las Vegas Sands’ shares manifest significant value and underscored their affordability against historical standards. Further buoying investor confidence are the operator’s demonstrations of shareholder value appreciation. Las Vegas Sands has reinstated its quarterly dividend and announced an ambitious $2 billion share repurchase plan. Such measures are optimistic signs, anticipated to support the faltering stock prices meaningfully.
“Management has noted that it has historically allocated capital returns in an 80/20 fashion with dividends and buybacks. But given current levels in shares, LVS expects buybacks to outpace dividends going forward,” Santarelli detailed. He expected aggressive buyback initiatives from Las Vegas Sands, given the company’s current valuation, with robust adjusted EBITDA estimates for 2024 and 2025.
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