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Las Vegas Sands' China Woes

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Las Vegas Sands' China Woes

When trouble rears its ugly head in the financial world, China frequently becomes part of the conversation.

Las Vegas Sands Corp. (NYSE: LVS) knows this all too well.

Macau

As a leader in both gaming and lodging, much of the company’s revenue has come from Macau, China.

As Zack’s pointed out, for a host of reasons, Macau (or more accurately, China) has become problematic for Las Vegas Sands.

Related Link: Bears Continue To Be On A Heater With Las Vegas Sands

Illegal Money Transfers

Macau casino stocks in May fell following publicity about the funneling billions of yuan from mainland China into casinos, a violation of China’s currency laws. China promised to crack down on what it called "suspicious practices."

Casino stocks including those of the Las Vegas Sands saw an uptick shortly thereafter when analysts indicated that worries over China's crackdown were overblown.

Slow Credit Growth And Other Problems

A drop in credit growth in China also affected gambling revenue in Macau. This came as Beijing expressed concern over the amount of accumulated debt in the economy.

Additional factors, including restrictions on visas and a smoking ban in casinos also worked to depress optimism and opportunity for growth in the Chinese-based gambling industry.

Hong Kong Protests

The student protests in Hong Kong have caused, according to some observers, many Chinese mainlanders to delay or cancel planned gambling junkets to Macau.

While Sterne Agee’s David Bain said the protests had a negative impact on Macau gaming, he also indicated the long-term outlook was more positive than negative.

Sterne Agee recently maintained a Buy rating on Las Vegas Sands, MGM Resorts International, Melco Crown Entertainment Ltd. and Wynn Resorts, Limited.

Reasons For Optimism

In addition to Sterne Agee, The Street has touted the strengths of the Las Vegas Sands.

In a recent report The Street said, "We rate Las Vegas Sands Corp. a BUY. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Related Link: Can The Bulls Save Las Vegas Sands Corp. From Falling Farther?

Reasons For Caution

In September, Wells Fargo downgraded the Las Vegas Sands Corp. from Outperform to Market Perform. On October 7, Deutsche Bank noted that the overall revenue forecast in Macau for Q4 was -15.3 percent and the revenue forecast for all of 2014 stood at 0 percent.

As a result, Deutsche Bank dropped Las Vegas Sands from Buy to Hold and lowered the price target to $65.

At the time of this writing, Jim Probasco had no position in any mentioned securities.

Latest Ratings for LVS

DateFirmActionFromTo
Nov 2019MaintainsOverweight
Sep 2019MaintainsOverweight
Sep 2019MaintainsNeutral

View More Analyst Ratings for LVS
View the Latest Analyst Ratings

Posted-In: Beijing China David BainAnalyst Color Previews Top Stories Analyst Ratings Trading Ideas Best of Benzinga

 

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