Las Vegas Sands Hits The Jackpot, China Drives Robust Recovery

Key Points

• Las Vegas Sands reports a blow-out quarter driven by strength in Macau and Singapore. 
• The analysts are raising their targets and leading the market higher. 
• The company's cash balance is growing, raising the question of when the dividend will be reinstated. 

The decline of COVID and easing travel restrictions drive a robust recovery for leisure stocks like Las Vegas Sands NYSE: LVS. That rebound took on a new tone with the company's Q1 report, characterized by words like robust and acceleration. The takeaway is that Las Vegas Sands and competitors like Wynn Macau OTCMKTS: WYNMF and MGM NYSE: MGM should also report stunning results, which should drive capital returns for investors.

Among the many attractions of investment in Las Vegas Sands are its rapidly improving balance sheet and the prospect of dividends. This company hasn’t paid a dividend since the pandemic began, but it is on the cusp of returning it, which is a catalyst for higher share prices. 

"While travel restrictions and reduced visitation continued to impact our financial performance during the quarter, a robust recovery in travel and tourism spending across our markets is now underway.  We remain enthusiastic about the opportunity to welcome more guests back to our properties throughout 2023 and in the years ahead," said Robert G. Goldstein, chairman and chief executive officer.

Las Vegas Sands Hits The Jackpot In Q1 

Las Vegas Sands was expected to accelerate its rebound in Q1, but the results are well above consensus, driven by strength in Macao and Singapore. The company reported $2.12 billion in net revenue, which is good for a gain of 125% compared to last year, and it beat the Marketbeat.com consensus estimate by 1500 basis points. Marina Bay Sands, the company’s Singapore property, produced record gaming revenue, while Macao gaming revenue topped $1 billion for the 1st time since 2019. 

The company’s margin expanded at all levels and in all comparisons due to its strength in gaming and non-gaming segments. The EBITDA grew more than 600% while the net income of $145 million reverses an operating loss near $0.500 billion posted last year. On the bottom line, the company’s $0.29 in adjusted EPS also reverses a loss and beats the consensus by $0.09 or 4500 basis points.

This led to increased cash; the company’s unrestricted cash balance is nearly $6.5 billion, with long-term debt of $15.97 billion. Investors should expect the debt balance to fall over the next few quarters and the possibility of share repurchases and a reinstated dividend. 

The Analysts Double-Down On Las Vegas Sands 

The analysts' trends were optimistic ahead of the Q1 release, and they have gained momentum in their wake. Marketbeat is tracking 14 analysts with current ratings, and 6 of them upped their price targets on the Q1 news. Their consensus is a Strong Buy/Overweight compared to the broader Moderate Buy, and the price target is also better.

The consensus of the new 6 is near $69, which is leading the broader consensus higher and about 15% above the pre-release price action, deep in the multi-year high territory. The broad consensus is up compared to last quarter and month, accelerating the increase in share prices. The news from Singapore and Macau may cause a melt-up in the stock and the sector that could spill over into other travel industries. 

The weekly chart is bullish. It shows a rally and consolidation breaking out to the upside in premarket trading. Assuming the market follows through on this signal, the stock could gain $15 to $20 by year-end and surpass the current high price target and the consensus.