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Las Vegas Sands: A Premier Way to Play Macao's Reopening, According to Morgan Stanley
Las Vegas Sands has been identified as a top gaming pick by Morgan Stanley analyst Stephen Grambling. With a $71 price target that suggests an 18.1% upside, Grambling believes Las Vegas Sands is the best way to play Macao's reopening and one of the final consumer recovery stories emerging from the Covid pandemic. Despite concerns about a slowing Chinese economy impacting casino stocks, the gross gaming revenue for casinos in Macao continues to rise. Grambling expects this revenue metric to reach 2019 levels at some point this year, particularly after hitting 65% in June.
The Best Way to Play the Mass Market
Grambling describes Las Vegas Sands as "the best way to play the mass market." While the company has less focus on the premium mass segment, it has successfully increased its mass market share even beyond pre-Covid levels. This trend is expected to continue, providing a positive outlook for the company.
Looking ahead to 2024, Grambling highlights several reasons to be optimistic about Las Vegas Sands. Strong performance at its Singapore property, a solid balance sheet, and the potential for a downstate casino license in New York all create opportunities for positive optionality. The announcement of a downstate license, the resumption of dividends, or a share buyback could act as near-term catalysts for a rise in share prices.
Below Pre-Pandemic Valuation
Despite a more modest recovery expected in 2024 compared to 2019, Las Vegas Sands is currently trading at just 12.8 times its enterprise value to EBITDA ratio. This valuation is below its pre-pandemic levels. Shares of Las Vegas Sands have already risen over 25% since the beginning of the year, indicating growing investor confidence in the company's prospects.
As Macao's casinos continue to recover, Las Vegas Sands stands out as the premier way to play the reopening. With strong performance in the mass market segment and multiple opportunities for growth, the company has the potential to deliver significant returns to investors. As such, Morgan Stanley believes Las Vegas Sands is a top gaming pick and one of the final consumer recovery stories to emerge from the Covid pandemic.
Conclusion: An Opportunity for New Businesses in the Casino and Gaming Industry
The endorsement of Las Vegas Sands by Morgan Stanley as a premier way to play Macao's reopening presents an exciting opportunity for new businesses in the casino and gaming industry. As the gross gaming revenue in Macao continues to rise, despite concerns about a slowing Chinese economy, there is a growing demand for entertainment and gambling experiences. This creates a favorable environment for new businesses to enter the market and capitalize on the recovery of the industry.
Las Vegas Sands' success in the mass market segment further emphasizes the potential for new businesses to target this consumer segment. With a positive outlook for the company and expectations of continued growth, there is room for innovative businesses to offer unique and enticing experiences tailored to the mass market's preferences.
Additionally, the optimistic opportunities outlined by Morgan Stanley, such as the potential for a downstate casino license in New York, present avenues for expansion and collaboration for new businesses looking to establish a presence in the industry. The announcement of such licenses, along with other catalysts like the resumption of dividends or share buybacks, could create a favorable market environment for new businesses to thrive.
Furthermore, the valuation of Las Vegas Sands, trading below pre-pandemic levels, indicates an opportunity for new businesses to enter the market at a relatively lower cost. This could allow for strategic investments in infrastructure, technology, and customer experiences, enhancing their competitive advantage.
In conclusion, the endorsement of Las Vegas Sands as a top gaming pick by Morgan Stanley highlights the potential for new businesses to thrive in the casino and gaming industry. Leveraging the recovery of the market, targeting the mass market segment, and exploring optimistic opportunities can position new businesses for success in this dynamic sector. By capitalizing on the growing demand for entertainment experiences and pursuing innovation, new businesses can establish themselves as key players in the industry and generate significant returns.
Article First Published at: https://www.cnbc.com/2023/07/14/morgan-stanley-names-this-casino-stock-a-top-pick-calls-it-the-best-way-to-play-macaos-reopening.html