Las Vegas Sands Strategic Efforts Bode Well: Should You Hold?

Las Vegas Sands Corp. LVS is likely to benefit from revenue diversification efforts, strong business model, expansion efforts and sales-building initiatives to boost non-gaming revenues in Macau. However, dismal traffic due to the coronavirus pandemic poses concerns. Let’s delve deeper.

Factors Likely to Drive Growth

Las Vegas Sands’ diversification efforts in Macao are quite encouraging. The company has invested more than $13 billion in Macao since 2004, consistently contributing to Macao's diversification and appeal as a business and leisure tourism destination. Despite the current scenario of the pandemic, the company announced that it will proceed with its $2.2-billion investment in order to strengthen its position in Macau.

Apart from this, the company is investing in The Londoner Macao and The Grand Suites at Four Seasons to strengthen portfolio. Backed by these investments, the company aims to capitalize on the likely structural growth in Macao in the coming years to stay ahead of the curve in terms of quality and scale of product and amenities.

Notably, these new products along with The Parisian Macao are likely to boost its strategic position and competitiveness across multiple segments, enabling growth in its retail business and meetings, incentive, convention and exhibitions (MICE) space. Markedly, these projects demonstrate the company’s commitment toward diversifying business as they are not solely meant for gaming.

Apart from this, the company is quite confident about its growth opportunity in Singapore. Despite the coronavirus pandemic, the company announced it will continue with its investment for the expansion of Marina Bay Sands, Singapore, thus expecting demand to be robust.

Concerns

Las Vegas Sands’ financials in 2020 are likely to be adversely impacted by the outbreak of coronavirus. Although casinos in Macau have reopened after the coronavirus-induced shutdowns, the company is witnessing low visitation. Since the severity and duration of the outbreak and its impact on the business cannot be estimated at present, the company has suspended its dividend program to maintain sufficient liquidity in case of a possible recession.

Moreover, increased hotel openings and promotional activities have made Las Vegas and Macao markets highly competitive. Thus, excess supply, especially in the Macao market, might reduce the company’s market share.

So far this year, shares of Las Vegas Sands have plummeted 22.3% compared with the industry’s 18% decline.

Las Vegas Sands — which shares space with Caesars Entertainment Corporation CZR, Red Rock Resorts, Inc. RRR and Penn National Gaming, Inc. PENN in the Zacks Gaming industry — has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
 
Penn National Gaming, Inc. (PENN) : Free Stock Analysis Report
 
Caesars Entertainment Corporation (CZR) : Free Stock Analysis Report
 
Red Rock Resorts, Inc. (RRR) : Free Stock Analysis Report
 
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