Market Overview

'Distinctly Positioned' Las Vegas Sands Is Morgan Stanley's Top Gaming Pick

Share:
'Distinctly Positioned' Las Vegas Sands Is Morgan Stanley's Top Gaming Pick

Las Vegas Sands Corp. (NYSE: LVS) is Morgan Stanley’s new top pick in the gaming sector.

Earlier this week, Morgan Stanley raised the price target on Overweight-rated MGM Resorts International (NYSE: MGM) from $40 to $41. For Equal-Weight-rated Wynn Resorts, Limited (NASDAQ: WYNN), the firm lifted its price target from $194 to $197. Morgan Stanley maintained an Overweight on Las Vegas Sands and raised the price target from $82 to $83.

Las Vegas Sands Leads In Mass Market Gaming

Las Vegas Sands is "distinctly positioned" in the U.S. Consumer Discretionary sector to drive a 10-percent, three-year EBITDA CAGR on low leverage and pay an "attractive" dividend yield, analyst Thomas Allen said in a note. 

Strength in the Macau market is continuing, with year-to-date visitation and gross gaming revenue both outperforming in 2018, the analyst said.  

Morgan Stanley's 2018 gross gaming revenue forecast is unchanged at 16 percent, but the firm is assuming a greater mass mix, which results in higher EBITDA, Allen said. 

With mass market gaming growth outpacing VIPs, Las Vegas Sands has a leading position in the category, which also led to its top pick status, according to Morgan Stanley. The sell-side firm raised its mass market gaming forecast for Macau to from 12 to 15-percent growth and cited three reasons for the move: 

  • January and February visitation is up 8 percent, with Chinese visitors up 15 percent and overnight visitors up 11 percent.
  • January and February 2018 gross gaming revenue has mass gaming up 23 percent against prior first-quarter estimates of 11 percent.
  • Mass market revenue grew 18 percent in the fourth quarter.

'Warming Up To WYNN'

With Wynn Resorts having the most exposure to Macau, the strength in the region bodes well for a company in a state of flux, given its management shakeup and uncertainties regarding its new Massachusetts property, Allen said. 

“We are warming up to WYNN again given it has the most exposure in our coverage to the attractive Macau market and likely continues to have the opportunity to outperform through its ramping Cotai property,” he said.

Wynn has done a "very good job" diminishing legal and regulatory overhangs, the analyst said — but some regulatory risk continues to linger, particularly in Massachussets, Allen said.

The company's outperformance in 2017 was helped by strength in VIP, "which we no longer see to be the case," he said. 

Related Links:

Vegas Strip Gaming Rebounds In February

The Casino Stock Gamble: Telsey Initiates Coverage On Wynn, Las Vegas Sands, Penn National

The Marina Bay Sands casino in Singapore. Photo by Someformofhuman/Wikimedia. 

Latest Ratings for MGM

DateFirmActionFromTo
Nov 2019MaintainsNeutral
Oct 2019MaintainsBuy
Sep 2019MaintainsEqual-Weight

View More Analyst Ratings for MGM
View the Latest Analyst Ratings

Posted-In: Macau Morgan StanleyAnalyst Color News Price Target Reiteration Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (LVS + MGM)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ARAVH.C. WainwrightReiterates31.0
QCOMCascendReiterates110.0
KMPHH.C. WainwrightReiterates2.5
HASusquehannaInitiates Coverage On27.0
BFRABenchmarkMaintains18.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Leerink's Takeaways From CNBC's 'Healthy Returns' Conference

Poll: Amazon The Most Trusted Name In Big Tech, Facebook Now The Least