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Las Vegas Sands Stock: Still Seems Expensive
Stock Analysis & Ideas

Las Vegas Sands Stock: Still Seems Expensive

Las Vegas Sands (LVS) is a developer and operator of destination properties that offer premium accommodation experiences, world-class gaming, entertainment, shopping experiences, celebrity chef restaurants, and a number of other luxuries.

The company owns and operates integrated resorts in the U.S. and Asia, comprising a diversified platform in the hospitality and gaming industry. Historically, the business has produced strong cash flows, while management exhibits a robust track record of seeking new exciting development opportunities.

However, Las Vegas Sands has suffered dramatically over the past couple of years, as COVID-19 materially impacted the resorts and casinos industry. Despite soft recovery signs, the company’s financials are still nowhere near their pre-pandemic levels.

Lots of industries that were originally impacted by COVID-19 have slowly but gradually regained their footing. However, hospitality and physical gambling seem to stay rather depressed. While Las Vegas Sands’ shares have somewhat gained year-to-date, the stock remains in the sphere of speculation as far as its short-to-medium term net income estimates go.

For this reason, I am neutral on the stock.

Stumbling Financials

As I mentioned, Las Vegas Sands used to feature a pristine track record of excellent financials. Even in the midst of the Great Financials Crisis, when consumers’ disposable income had been greatly shortened, the company achieved solid revenues and controlled its losses, notwithstanding running in such a cyclical industry.

That said, nothing could be done to sustain the company’s cash flows during the time that casinos and resorts effectively shut down; and the recent recovery seen is anything by pleasing. The company’s LTM (last 12 months) revenues currently stand at $4.23 billion (down substantially from their pre-pandemic levels of close to $14 billion), while the company has lost $1.15 billion during this period.

Q4-2021 revenues of $1.01 billion remained depressed, even declining 0.7% from Q4 2020, which is certainly not encouraging at all. Consumers are likely still reluctant to spend time in packed indoor spaces, so the company’s cash flows are likely to stay under pressure for an unclear amount of time. This is especially reinforced when taking into account that online gambling has skyrocketed over the past couple of years.

Analysts estimate that the company will produce EPS of around $0.29 in Fiscal Year 2022, implying that the stock is trading at a forward P/E of 152. Considering that the company’s financials remain under pressure and the timing of a full recovery remains unknown, I would argue this is a steep price to pay when so much speculation is involved.

Wall Street’s Take

Turning to Wall Street, Las Vegas Sands has a Moderate Buy consensus rating, based on seven Buys, four Holds, and one Sell assigned in the past three months. At $52.45, the average Las Vegas Sands price target implies 18.6% upside potential.

Conclusion 

In my view, Las Vegas Sands Corp. owns high-quality assets in the casino and hospitality industries. That said, the current stock price does not seem to be justified. With results remaining uninspiring and not a clear roadmap towards the company’s past profitability levels, I don’t see how paying such a rich forward multiple is meaningful at the point.

Further, with the stock’s dividend remaining suspended and likely not going to be resumed for years to come, there is little to no incentive to buy the stock at its current levels. Hence, I am neutral on Las Vegas Sands.

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