Shares of Las Vegas Sands Corp. have fallen sharply since the company announced its first-quarter earnings Wednesday that Wall Street analysts said missed consensus in Macau on both revenue and adjusted earnings.
Despite that, two analysts recommended buying the stock, while two others lowered their price target and called for holding.
LVS closed at $45.46 on Friday after sitting just above $50 before the earnings release. Barron’s reported Thursday that the share price was on track for its largest drop since October 2022 and was the worst performer on the S&P 500 that day.
Barron’s reported Sands’s earnings of 75 cents a share beat Wall Street’s estimate of 62 cents. Net revenue of $2.96 billion was higher than the $2.94 billion consensus, but Macau’s $1.81 billion in Macau fell short of the expected $1.94 billion.
John DeCree, an analyst with CBRE, was among those optimistic and recommended buying, while lowering the price target from $74 to $64 in light of Macau. He said Macau was disrupted by a low hold and construction at Sands’s Londoner property and Cotai Arena. Upwards of 600 hotel rooms were offline on the Sheraton side of the property.
“Construction is expected to continue all year and the number of rooms offline at the Londoner will increase in the second and third quarters,” DeCree said. “While the disruption had been well telegraphed by management, we anticipated less impact, given the historically lower-yielding rooms relative to the rest of the portfolio. Also, on the fourth-quarter earnings call, management estimated construction disruption would be more back-half weighted this year, given approval timelines. While much, if not all, of the miss is explainable, we are lowering our rest-of-year estimates to account for the ongoing construction disruption, peaking in the second and third quarters this year.”
DeCree called Marina Bay Sands in Singapore “a juggernaut” by posting a record quarterly EBITDA of nearly $600 million versus a consensus of $480 million. Management attributed its growing success to the completion of recent capital programs at Towers 1 and 2, but still sees plenty of room to run, DeCree said. The company moved onto the $750 million reinvestment program at Tower 3, which is scheduled to be completed by 2Q25 and will support additional growth in 2025 and beyond.
“Although disruptive in the near term, LVS will remain the 800-pound gorilla in Macau and is well positioned for long-term growth,” DeCree said. “In the meantime, Singapore gives investors plenty to get excited about and is essentially now funding an aggressive share-repurchase program. We appreciate investor caution related to the China macro uncertainty, but LVS offers plenty of valuation support from Singapore, a proven track record in Macau, an investment-grade balance sheet, and now a generous shareholder-return program.”
Deutsche Bank’s Carlo Santarelli reaffirmed a buy recommendation with a $62 price target, down from $66.
“We think the key focal points for investors in the first quarter were largely disappointing, despite lower-than-consensus buyside expectations,” Santarelli wrote. “We expect consensus revisions lower as our estimates have been reduced, and we expect the shares to experience some near-term headwinds given the results and until LVS finds firmer footing.”
Despite the disruptions in Macau, LVS is steering clear of a promotional environment in Macau and opting instead to cede share, Santarelli said. Given the strength at Marina Bay Sands and an attractive relative valuation, in light of the growth markets to which LVS is exposed, “we believe the downside is limited and the upward potential remains compelling.”
David Katz, an analyst with Jefferies Equities Research, recommended holding the stock as the recovery in Macau and Singapore continue to make headway and shows some evidence in quarterly results.
“Management expects this to continue and remains positive on Asia, despite weaker trends in China,” Katz wrote. “However, Macau renovations should weigh on revenues and profitability throughout 2024 and we expect the uncertainty in China to continue to temper shares. Reiterate hold and reduce target to $53.”
Katz said they’re updating their projections and expect the company to generate $11.9 billion in revenue and $4.8 billion of adjusted EBITDA in 2024 versus $12.2 billion and $4.9 billion previously. Their 2025 estimates call for $13.1 billion for revenue and $5.3 billion for adjusted EBITDA from $13 billion and $5.36 billion previously.
Joseph Greff, an analyst with J.P. Morgan, lowered the price target to $55, down from $59. Greff called Marina Bay Sands results “stellar” and better than expected, having benefited from increased air lift, particularly from China, and renovations.
In Macau, LVS lost more market share than expected, which Greff attributed to higher exposure to the base mass versus peer’s premium-mass mix and competitors who are offering some higher level of premium mass promos/reinvestment levels to gain market share. He said LVS needs to see market growth in the base-mass segment.
“We think it could be a couple of quarters for its Macau business to see sequential improvements of any note but do think Singapore remains healthy,” Greff wrote. “Its capital return should pick up going forward, especially on any weakness, and see capex driving medium- to longer-term EBITDA growth.”
