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Las Vegas Sands' (LVS) Macao Business to Aid Amid High Debt

Las Vegas Sands Corp. LVS is likely to benefit from the impressive recovery in travel and tourism demand in Macao and Singapore. Also, the company's next phase of capital investment at Marina Bay Sands bodes well for its prospects.

Las Vegas Sands witnessed an impressive recovery in Macao in the first quarter of 2024. During the quarter, the company reported significant growth in property visitation, gaming volumes, retail sales and hotel occupancy in the Macao region.

This Zacks Rank #3 (Hold) company’s earnings estimates for 2024 indicate a growth rate of 39.2% from the year-ago period on a 14.2% revenue improvement. This can further be substantiated by its VGM Score of A. These positive trends indicate bullish analyst sentiments, robust fundamentals and the continuation of outperformance in the near term.

However, high debt and stiff competition remain a concern. Shares of the company have declined 26.1% in the past year compared with the Zacks Gaming industry’s fall of 7.5%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let us discuss the factors highlighting why investors should retain the stock for now.

Growth Catalysts

Macao Business to Drive Growth: Las Vegas Sands 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, has positioned it impressively to deliver solid growth in the first quarter and full year of 2024. The growth was primarily driven by an increase in market visitation along with travel and tourism recovery.

During the first quarter of 2024, Macao’s visitation recovered to approximately 89% of the 2019 levels. Furthermore, the total capital and operating investment commitments of about $4.5 billion over the 10 years in Macao positions the company well to drive value and growth prospects.

Singapore Poised for Growth: LVS observed strong recovery in travel and tourism in Singapore. Management's decision to keep investing in Marina Bay Sands (MBS) has contributed to its solid growth. In the first quarter of 2024, MBS achieved solid growth in both gaming and non-gaming segments thanks to the improving airlift capacities, as well as recovery in travel and tourism spending (primarily from China).

The enhanced service offerings, along with the new suite product, also added to the uptrend. In the reported quarter, the rolling volumes in Singapore were $8.2 billion, up 15.5% year over year. Mass gaming wins at MBS were $687 million, up 25.1% from $549 million reported in the year-ago quarter.

Focus on Marina Bay Sands: The MBS renovation and refurbishment program added to the growth momentum of the company. It has 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 the second quarter of 2025. This phase will add 550 redesigned rooms, with 380 new suites. Upon completion of both phases, the resort will boast 1,850 redesigned rooms, including 770 suites. This expansion aims to support further growth in 2025 and beyond.

Concerns

High Debt: As of Mar 31, 2024, total debt outstanding (excluding finance leases and financed purchases) was $13.94 billion compared with $14.01 billion as of Dec 31, 2023. As of the first quarter of 2024, unrestricted cash balances amounted to $4.96 billion, down from $5.11 billion reported in the previous quarter. Although the debt level was sequentially lower, it is still on the higher side compared to Las Vegas Sands’ cash balance.

Stiff Competition: Increased hotel openings and promotions have intensified competition in the Las Vegas and Macao markets. The Macao market, in particular, faces potential market share challenges due to excess supply. The recent opening of The Parisian Macao and upcoming resorts at the Cotai Strip add to competitive pressure from Chinese casino operators and U.S.-based companies.

Key Picks

Here are some better-ranked stocks from the Consumer Discretionary sector.

Strategic Education, Inc. STRA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

STRA has a trailing four-quarter earnings surprise of 36.2%, on average. The stock has gained 46% in the past year. The Zacks Consensus Estimate for STRA’s 2024 sales and earnings per share (EPS) indicates an increase of 6.4% and 33.3%, respectively, from the year-ago levels.

Netflix, Inc. NFLX presently sports a Zacks Rank of 1. NFLX has a trailing four-quarter earnings surprise of 9.3%, on average. The stock has risen 47.5% in the past year.

The consensus estimate for NFLX’s 2024 sales and EPS implies a rise of 14.8% and 52.2%, respectively, from the year-ago levels.

Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank of 1. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has surged 66.3% in the past year.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS implies growth of 16.8% and 63.8%, respectively, from the year-ago levels.

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Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report

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Zacks Investment Research