Las Vegas Sands (NYSE: LVS) has secured a spot on Deutsche Bank's "Fresh Money List" for the first quarter of 2024, marking it as one of the firm's top convictions for the new year. The renowned casino operator, holding the largest market capitalization in its sector, is the sole gaming equity among the nine consumer stocks included in the list. Despite a modest year-to-date increase of just 1.73% in LVS shares, significantly trailing the S&P 500's 24.31% return, Wall Street has been buzzing with bullish sentiments toward the Venetian Macau operator.
Deutsche Bank analyst Carlo Santarelli expressed optimism about Las Vegas Sands' potential, emphasizing considerable value in the stock at its current levels. Santarelli debunked concerns surrounding the recovery trajectory in Macau, stating, "We believe LVS, from both a fundamental and valuation perspective, represents a compelling long idea moving forward." Notably, Sands is not currently operating a U.S. casino hotel, which could be advantageous amid expectations of reduced wagering-related spending by U.S. consumers in the coming year.
Addressing headwinds in China and Macau, Santarelli acknowledged the recovery in Macau this year but noted that shares of several concessionaires, including Sands China, experienced significant declines. Despite challenges and depressed valuations, the analyst argued that factors such as high property investment and concerns about China's economy are already known and understood. He pointed out that previous instances of Chinese economic weakness did not exert significant pressure on Macau spending.
"Clearly, the growth outlook offered by the Macau-oriented stocks has not been a reason for investors to gravitate to them of late. Yet we don’t believe the market outlook has changed materially, if at all, and LVS shares offer an attractive investment opportunity," observed Santarelli.
Highlighting Las Vegas Sands' attractive valuation, Santarelli underscored the company's shareholder rewards initiatives, including the reinstatement of its quarterly dividend and a recently announced $2 billion share repurchase plan. The analyst expects the buyback to outpace dividends, noting that LVS currently pays an approximately $0.80 annual dividend.
With the current valuation at 10.3 times the 2024 adjusted EBITDA estimate and 9.1 times the 2025 adjusted EBITDA estimate, Santarelli anticipates aggressive buybacks in the early stages to support the stock.
By fLEXI tEAM