Las Vegas Sands Corp. (LVS) reports Q1 2021 earnings after Wednesday’s closing bell, offering a glimpse into the gaming industry’s ongoing recovery from the COVID-19 pandemic. Analysts are looking for the old school operator to lose $0.22 per-share on $1.37 billion in revenue, worse than the $0.02 loss reported in the same quarter last year. The stock ran in place after missing Q4 2020 top and bottom line estimates in January and is now trading close to a 14-month high.
Leaving Las Vegas
The Nevada Gaming Board reported that statewide ‘gaming win’ fell 25.9% year-over-year in February, with a 41.5% loss on the Las Vegas Strip. The March report at the end of this month should offer greater transparency into current conditions because it should compare favorably to March 2020, when the industry came to a grinding halt. Even so, challenges remain, with Nevada casinos allowing just 50% of capacity until final restrictions are lifted in June.
This should be Las Vegas Sands’ last full quarter with Nevada exposure, despite the company’s name, because it sold The Venetian and Sands Expo and Convention Center in March to focus on Asian operations. Macao is now waking up from the dead at a rapid pace, with the local Gaming Inspection and Coordination Bureau reporting that March generated the highest monthly revenue since January 2020. Even so, first quarter receipts were still down 22.5% year-over-year.
Wall Street and Technical Outlook
The property sale has provoked a mixed reaction on Wall Street, with consensus dropping to an ‘Overweight’ rating based upon 8 ‘Buy’, 1 ‘Overweight’, and 7 ‘Hold’ recommendations. Price targets currently range from a low of $53.50 to a Street-high $86.50 while the stock opened Wednesday’s session $10 below the median $69.50 target. This weak placement suggests that Main Street has reservations about the transaction as well.
Las Vegas Sands topped out in the 80s in 2014 and entered a decline that hit a 10-year low in the 30s in March 2020. The stock recouped about 80% of the pandemic decline into March 2021 but hasn’t ended the string of lower highs in place for the last three years, indicating the downtrend is fully intact. However, accumulation readings are telling a more bullish tale, lifting to the highest highs since 2011. Given the conflict, mixed action into the third quarter looks the path of least resistance.
Casino and resort operator Wynn Resorts Inc. (WYNN) fell to a 7-week low on Monday morning, with sector sentiment deteriorating at a rapid pace following months of weak visitation numbers in Macao and Las Vegas. A potential money laundering scandal at rival Las Vegas Sands Inc. (LVS) is adding to selling pressure, warning WYNN shareholders the stock could eventually test the first quarter’s multiyear low in the mid-30s.
Industry Slump Undermining Wynn Resorts Revenue
The Macao Gaming Commission and Coordination Bureau recently reported that August gross revenue fell an astounding 94.5% year-over-year while the Nevada Gaming Board’s latest release noted the July Las Vegas Strip gaming win rate dropped 39.9 % year-over-year. Domestic and international travel restrictions and COVID fears are driving the bearish metrics, ahead of a winter that could ignite a second pandemic wave.
Goldman Sachs analyst Stephen Grambling downgraded Wynn Resorts from ‘Buy’ to ‘Neutral’ earlier this month, removing the stock from their ‘Conviction List’ and dropping the price target to $95. Grambling justified the bearish call with troubling statistics about Macao operations, stating “Wynn holds outsized exposure to Wynn Macao and, after revising our forecasts to embed softer VIP in 2021, we find limited upside, given the stock’s recent run.”
Wall Street And Technical Outlook
Wall Street consensus now stands at a ‘Moderate Buy’ rating based upon 9 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions and move to the sidelines at this time. Price targets currently range from a low of $72 to a street-high $120 while the stock is now trading on top of the low target. These predictions look way too high but the humble placement may limit downside, at least in the short-term.
Technically speaking, Wynn Resorts has been stuck in a downtrend since posting an all-time high near 250 in 2014. The stock has lost substantial value since a recovery rally topped out near 200 in 2018, with the downside accelerating to an 8-year low in the first quarter of 2020. The bounce since that time has failed to remount the broken 200-month moving average, raising odds the decline will eventually test and possibly break the March low in the mid-30s.
Macao and Las Vegas resort operator Las Vegas Sands Inc. (LVS) reports Q2 2020 earnings after the U.S. closing bell on Wednesday, with analysts expecting a $0.73 loss on $549.0 million in revenue. That would mark a stomach-churning 80% year-over-year decline as a result of historic headwinds, driven by the worldwide pandemic. Companies with Macao exposure have been hit harder than domestic-only operations so far in 2020 because the Wuhan outbreak impacted the sector well before COVID-19 struck the United States and Europe.
Las Vegas Sands Vulnerable To Downside Surprise
65% of company revenue is booked through Macao while Las Vegas operations comprise just 12% of revenues. Both venues have reopened but Las Vegas traffic has been hurt badly by the resurgence in Nevada COVID-19 infections, with daily positives hitting an all-time high just last week. Given the adverse environment, current consensus may be understating the negative impact to second quarter earnings, raising the potential for a downside surprise.
Las Vegas Sands CEO Sheldon G. Adelson commented about reopening efforts following shutdowns in Macao, Las Vegas, and other key properties, noting “I remain extremely bullish about the future of our company and its growth prospects. We operate best-in-class properties in the leading markets in our industry and we are currently executing significant investment programs in both Macao and Singapore to create meaningful new growth from our existing portfolio”.
Wall Street And Technical Outlook
Wall Street currently rates Las Vegas Sands as a ‘Strong Buy’, based upon 9 ‘Buy’ and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close out positions at this time. Price targets range from a low of $48 to a street high $67 while the stock is now trading within a few cents of the low target. All in all, these ratings look over-optimistic, failing to account for growing infections and the likelihood of a second wave in China this winter.
The stock topped out in 2018 at a 4-year high in the 80s and sold off into the upper 40s in 2019. It broke that trading floor in the first quarter of 2020 and dropped to the lowest low since 2010, highlighting extensive technical damage. A bounce into June stalled at the broken 2019 support, yielding nearly 7 weeks of sideways action that’s failed to mount the formidable barrier. As a result, it’s the price level to watch if tonight’s earnings generate a ‘buy-the-news’ reaction.