Las Vegas Sands Should Continue To Rebound

| About: Las Vegas (LVS)


Las Vegas Sands is starting to rebound after an almost 20% decline in the stock.

The gaming company is starting to gain some positive mentions by analysts as well.

This looks like a good long term entry point as growth drivers remain in place and the stock has technical support at just below current levels.

Las Vegas Sands (NYSE:LVS) continues to rebound from an approximate 18% decline suffered earlier in the quarter on concerns about a slowdown in gaming revenues from Macau. This pullback is looking more and more like a good entry point for long term growth investors that want to gain exposure to Asia where "Las Vegas" Sands gets ~85% of its revenues and almost all of its growth - Macau alone supplies ~80% of overall sales.

First, the sell-off looks like it has run its course and the stock has built some technical support at around $72.75 a share (See Chart).

Second, analysts are starting to come out with support stating the recent weakness is a blip. Morgan Stanley came out this week stating sell-off was buying opportunity and reiterated its "Outperform" rating on Las Vegas Sands. Thomas Allen, the analyst at Morgan Stanley, notes the "Las Vegas recovery thesis is clearly building momentum; 2012 LV market EBITDA was still ~30% below peak" and also states there is "potential for cyclical upside as Las Vegas has lagged the general consumer recovery." In addition, Morgan sees Macau gaming revenues moving back up past 15% annually by 2016 as the mass market segment continues to funnel traffic to the peninsula. Las Vegas Sands is in the best position to serve this migration to a mass market from a VIP focused market.

Wells Fargo also sees the shares bottoming out after sliding in recent months. The bank notes the short term may be choppy but the longer term drivers of value are in place.

The other potential long term catalyst other than Macau growth returning to more normalized levels over the summer is the possibility that Japan will open its market to gaming. A bill is being debated in its legislature. Japan's prime minister recently paid a visit to two casino-resorts in Singapore, where he stated casinos could help revitalize the Japanese economy, underlined growth in support for legalization of casino gambling

Although this would require a significant capital investment by Las Vegas Sands, it would be a huge long term boost to growth prospects. Japan should be a huge new growth engine and the company has experience in negotiating with Asian countries (Macau, Singapore) in acquiring the necessary gaming licenses/concessions. This certainly seems a better long term bet than the huge complex the company was trying to get approved in Spain that was recently kyboshed.

Despite concerns about recent slowing revenue growth in Macau, the consensus earnings estimates for LVS for both FY2014 and FY2015 have moved up over the past two months. The shares go for ~19 times forward earnings, a slight premium of the 16-17 times forward earnings the overall market is currently selling for. However, revenues at Las Vegas Sands are tracking to post year-over-year gains in the high teens this year and earnings are tracking to post a 30% to 35% increase as well. The shares also yield 2.7%, slightly above 10 year treasury yields. ACCUMALATE

Disclosure: The author is long LVS. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.