Goldman Sachs Likes Las Vegas Sands, Few Others Feel Same Way

Posted on: November 29, 2021, 10:54h. 

Last updated on: November 29, 2021, 11:31h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Investors looking for contrarian ideas among gaming equities have a veritable buffet to choose from at the moment. But Goldman Sachs highlights a single idea in the group: Las Vegas Sands (NYSE:LVS).

Las Vegas Sands
Goldman Sachs has a contrarian view of Las Vegas Sands. The bank says the casino stock could soar. (Image: Fox Business)

The Wall Street bank recently published a list of out-of-consensus ideas or stocks it likes that are out of favor with other analysts. The casino operator made the cut.

To be included on the list, a stock must be rated “neutral” or “sell” by the majority of other research firms. Goldman’s 2022 earnings before interest, taxes, depreciation and amortization (EBITDA) forecast must be at least two percent above consensus.

Additionally, the stocks must offer at least 10 percent upside to Goldman’s price target. Sands checks those boxes.

These names appear underappreciated by the market and could generate alpha for investors with a contrarian view,” said Vice President Deep Mehta in a note to clients.

Las Vegas Sands is down 36.46 percent year-to-date, making it one of the worst-performing large-cap gaming equities, and the epitome of a contrarian idea.

Details on Goldman’s Sands Call

While LVS is one of 13 names on Goldman’s out-of-consensus list, it’s the only gaming equity in the group, though it is one of four reopening ideas. The other three are United Airlines, Hyatt Hotels, and Marriott International.

There’s no denying the casino operator is out of favor. Just 47 percent of the Wall Street analysts covering LVS have “buy” ratings on it, according to Goldman. Nearly 44 percent below its 52-week high, the stock offers upside potential of 73 percent to Goldman’s price target.

With five of its six integrated resorts located in Macau – the other is Marina Bay Sands in Singapore — LVS stock is highly correlated to the goings-on in the world’s biggest casino center. That’s been a drag on the stock this year.

Owing to a slow-moving recovery in Macau – one that’s been hampered by recent operator angst regarding the possibility of increasing government oversight — financial markets are rewarding operators with heavy US exposure. In turn, they are punishing those, such as LVS, that are more reliant on Macau.

Goldman View Not Far-Fetched

Goldman’s thesis that LVS could be a contrarian play isn’t unreasonable. Any near-term positive news on border reopenings and easing of regulatory proposals in Macau could spur the stock higher.

Additionally, the operator is dominant in the mass market segment, meaning recent concerns regarding the state of Macau’s VIP market may be overstated as they pertain to Sands.

While it’s out of favor among Wall Street analysts, LVS stock has some fans among well-known investors, including Omega Advisors, the hedge fund controlled by financier Leon Cooperman.

The stock is also recently a favorite of retail investors sensing value due to the beleaguered share price.