Las Vegas Sands (NYSE: LVS) is a Nevada-based integrated casino and resort developer with operations in America and Asia.
I am bullish on the stock. (See Analysts’ Top Stocks on TipRanks)
Positive News on Hong Kong Restrictions
Gambling stocks, including Las Vegas Sands, have formed a short-term momentum pattern as Hong Kong’s Chief Executive Carrie Lam was quoted saying that the city will prioritize quarantine-free business travel after the border with mainland China re-opens.
Since the announcement last week, Las Vegas Sands stock has gained by nearly 10%, in turn breaking through its 10-day moving average and out of the oversold RSI (Relative Strength Index) territory.
U.S. Government’s Reaction to Omicron
The Omicron variant seems less of a concern than most initially thought. Hospitalization rates aren’t increasing exponentially, and it’s believed that the Pfizer booster shots will provide 70%-75% resistance to the variant.
Aside from that, it seems as though the U.S. government is focused on vaccine mandates rather than shutting down casinos and resorts again. The evidence is clear enough to suggest that we’ll have our problems with recurring variants, but hard lockdowns may be something of the past.
Las Vegas Sands has already benefitted dearly from re-openings as revenue grew 92.2% year-over-year, as of its Q3 earnings report on October 20. We may see this pattern recur for a while, as the realized revenue is still approximately 2.8x below what it was pre-pandemic.
Key Figures
Although the company is still a long way from producing pre-pandemic results, there are a few indications that we may be looking at a potential growth stock here.
Las Vegas Sands divested $6.2 billion of its assets the past year, in turn increasing its working capital by 2.9x year-over-year.
It’s thus possible to infer that Las Vegas Sands has the capacity to execute a number of nimble acquisitions in 2022 to improve on its sales-to-CapEx ratio (5.1x), especially if we consider the increase in capital in tandem with the $1.64 billion of cash available on the firm’s balance sheet.
Wall Street’s Take
Turning to Wall Street, LVS has four Buys and seven Holds assigned for a Moderate Buy consensus rating. The average Las Vegas Sands price target is $49.05, which implies 34.5% upside potential.
Concluding Thoughts
Las Vegas Sands stock has been one of the most oversold stocks during the pandemic, as hard lockdowns have imposed a significant amount of pressure on the company’s asset-heavy business model.
This may present an opportunity, as the stock has just broken through the oversold threshold, and its 10-day moving average.
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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