Bank of America: Buy Wynn, Sands Las Vegas as Coronavirus Levels Off

If you've reconsidered your vacation plans at any point in the last two months, then congratulations: you're probably aware of the coronavirus. It's done a number on the travel sector so far, but with reports seeming to vary about just how much this could really do going forward, new reports from Bank of America (NYSE: BAC) emerging are taking the optimistic high road. In fact, the new word suggests that investors should buy into both Wynn Resorts LTD (NASDAQ: WYNN) and Las Vegas Sands Corp. (NYSE: LVS), because the coronavirus is leveling off.

Buying the Dip?

Bank of America took both of these companies and upgraded them from “neutral” to “buy,” a move that sent both stocks upward. Wynn took at 3.5% leap upward, and Las Vegas Sands jumped 2.7%, though both had given back some of those gains as of this writing.

This actually represents an about-face for Bank of America; just last month, it dropped its ratings on Wynn Resorts thanks to the coronavirus in general, and the likely impact the virus would have on people's plans to go and spend a couple days at a time surrounded by people.

Fast forward a month, and Bank of America research—as expressed by analyst Shaun Kelley—asserts that conditions are improving, as both daily growth rates and sequential growth rates have been either stable or in decline for about a week.

Now, Bank of America has an $80 per share price target on Las Vegas Sands, up from $72 previously. As for Wynn Resorts, that price target remains at $150 per share. Our own blueprint on trading Las Vegas Sands suggests some opportunities could be in play, along with several potential sympathy stocks that may help out.

Location, Location, Location

One of the biggest problems for casinos—and Wynn and Sands in particular—is the level of exposure to Asian markets they had. Wynn and Sands are two major operations in Macau, which meant significant hits to their operations from closures, reduced incomes, and direct virus exposure.

It was enough to take Wynn Resorts shares down about 5% on the year so far, and leave Las Vegas Sands flat. However, with new cases seemingly in retraction, that impact may be about to boil off, and present an opportunity for buying the now somewhat-depressed shares at good prices.

The point to watch, Bank of America noted, is to see if Macau casinos actually reopen as scheduled. The government shut down such operations for 15 days previously, and should the casinos restart operations, that should spell at least enough of a return to normalcy to get things back up and running.

The Value of Diversification

The one good thing that could be said about the coronavirus is that its impact outside of China was significantly lessened, and its impact outside of the Asian content was pretty much a non-starter. One columnist referred to it as a “wet petard”, a wonderfully apt analogy. Since Wynn has a substantial business in Macau, but also hefty business in the United States, the end result is that any impact would be limited in scope.

The risks of operating casinos in the US in the midst of the coronavirus is comparatively minimal. While there will always be cautious types who stay indoors in such events and away from crowds, that portion will likely be a minor part of operations at best. In fact, given reports about the “wet petard” that was the coronavirus outside of China, we may well see things shift back to normal in that area in short order.

Still, though, it may be a bit early to count this bug out of action. With flu season in full swing and immune systems weaker everywhere thanks to the cold weather in the northern hemisphere, people may take a couple of extra weeks, or maybe even months, to see if the virus has effectively bailed out of the picture and it's safe to resume gambling, shopping, staying in hotels, or whatever crowd-heavy activity was in mind. This is likely to be particularly true in China, where some areas are still on lockdown at the last report. That could be one of the biggest drags on Asian-exposed operations around.