Las Vegas Sands

Las Vegas Sands Could Break 11-Year Support

Las Vegas Sands Corp. (LVS) is trading lower by nearly 5% on Wednesday, within spitting distance of 2020’s pandemic low, after China proposed tighter regulation of Macao casinos. Rival Wynn Resorts Ltd. (WYNN) is dropping like a rock as well, hitting the lowest low since November 2020. Both stocks have underperformed major indices by a country mile so far in 2021, trading deeply in negative returns, fueled by ongoing weakness in U.S. and Macao gaming operations.

Heavy-Handed Regulation Ahead

China proposes to remove the current sub-concession system, appoint Communist party delegates to oversee gaming operators, and compose a new illegal deposit crime to address money laundering. That nation’s attacks against the excesses of capitalism have taken a darker tone this year, punctuated by severe gaming restrictions for minors and, as colorfully scribed by Forbes, the “protracted dismemberment of billionaire Jack Ma”.

Macao is still getting hit hard by the pandemic, with border restrictions limiting traffic. As Las Vegas Sands noted in last week’s press release, “travel restrictions and the evolving COVID-19 situation in Macao and mainland China continue to limit visitation and hinder (majority-owned) Sands China Ltd. current financial performance. The COVID-19 pandemic has materially adversely affected the number of visitors to SCL’s facilities and disrupted SCL’s operations, and SCL expects this adverse impact to continue until the COVID-19 pandemic is contained.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly upbeat, given the exceptionally poor performance, with an ‘Overweight’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’ and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions, even though Sands has dropped nearly 53% in the last six months. Price targets currently range from a low of $50 to a Street-high $80 while the stock will open Wednesday’s session a jaw-dropping $13 below the low target.

Las Vegas Sands topped out 60 points under 2007’s all-time high in 2014 and entered a sideways pattern that briefly undercut long-term support below 35 during 2020’s pandemic decline. The subsequent uptick carved the fourth lower high in seven years in March 2021, giving way to a steep decline that’s now stretched within four points of last year’s low.  This is a dangerous set-up due to repeated action near this level since 2011, raising odds for a secular breakdown.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.