Do not gamble on Las Vegas Sands in front of its revenue

<p>Las Vegas Sands (NYSE: LVS), the casino developer and operator, is expected to report first quarter results soon. So far in April, the LVS share price has increased by approximately 13%. Despite the recent rise, shares are so far 30% lower and hovering around $ 48.

Source: Andy Borysowski /

Now, long-term investors are wondering if they should buy into the company around these levels.

If you do not currently own LVS shares, you may want to wait until you have analyzed the upcoming Q1 measures to get a better estimate of the full impact of the Covid-19 pandemic on operations. The share price will probably be volatile in the next few days.

LVS stock and the pandemic

Las Vegas Sands owns and operates several locations in the United States and Asia. They include The Venetian Resort and Sands Expo in Las Vegas and Marina Bay Sands in Singapore.

Through majority ownership in Sands China Ltd. Las Vegas Sands also operates several properties on the Cotai Strip in Macao as well as on the Macao Peninsula.

When the new coronavirus outbreak first hit China earlier in May, management closed Macao resorts for 15 days, according to local authorities.

Macau is currently the only jurisdiction where it is legal to play in China. During the closure in February, “gross gaming revenue fell almost 90%.” Las Vegas Sand’s exposure to Macau accounts for approximately 70% of total revenue.

When the pandemic began to affect our beaches, Las Vegas Sands also closed its US properties on March 17. In a press release, the company said, “Although we hope that this closure is a short-term necessity, we are realistic that it may be a long-term event. As we have done before, we are fully prepared to support our team members for a longer period of time should the need arise. “At this point, we do not know when they will reopen.

The current indication is that the virus has already peaked in China. But at this point, health-related problems are still high in the United States. In the next few days, President Donald Trump is likely to consult with various federal and state agencies. Then we know the potential opening date for our economy.

But casinos are cramped places. With a gradual opening of the economy or a second wave of the eruption, the recovery of the LVS share may take longer than originally expected.

Will Las Vegas Sands Ask for Government Assistance?

On March 27, President Trump signed the CARES Act, which gives the US economy more than $ 2 trillion in stimulus.

Earlier in March, the gaming industry had joined airlines and various other groups in asking for government financial aid. According to the American Gaming Association (AGA), by the end of March, all 989 commercial and regular casinos across the country had closed their doors.

Now we have the details in the bill. Companies that receive federal support will not be able to distribute or buy back their own shares.

Las Vegas Sands has announced that it will not apply for state aid.

It may still be too early to say how most casino operators will handle the given uncertainty in the coming months. If there is already a global recession, the worst may not necessarily be behind the LVS share.

If, after all, these companies decide to apply for state aid, they would also have to stop their dividends and repurchase shares.

The LVS share’s current dividend yield is approximately 6.6%, a very attractive amount to collect under normal circumstances. But if it needs to save money, management may need to reduce or completely cancel the dividend during the year.

Then the battered LVS shares will not be able to deliver a robust return in 2020.

What you can expect from Q1 revenue

Las Vegas Sands is expected to release first quarter results soon.

When the reported results for the fourth quarter and the turn of the year at the end of January, it exceeded revenues and revenues. It had sales of $ 3.51 billion for the quarter ended December 2019. A year ago, quarterly revenue was $ 3.48 billion.

The result for the fourth quarter was 88 cents. Last year, the number was 77 cents per share. Another strong point was that the casino group had $ 4.23 billion in cash in the balance sheet. Overall, the results showed that Las Vegas Sands had a robust 2019.

The expected Q1 figures, on the other hand, will undoubtedly show that the casino operator’s operations are negatively affected by these difficult times. However, it is not yet possible to know the extent of the damage to the company’s results.

In other words, investors’ reaction after the quarterly call will be based on both the Q1 figures and management’s comments on the effects of the pandemic.

Therefore, if you are not yet a shareholder, you may want to wait before making any capital in LVS shares. You may be interested to know that Deutsche Bank has recently lowered its share price target from $ 75 to $ 50.

If you already own LVS shares, you may want to ride the scales. Alternatively, depending on your experience of options, you can initiate a covered call position.

For example, a call that expires on May 15 at the payout can help reduce the volatility of your position. It would also allow you to participate in an upward movement while giving some disadvantages.

It can take several quarters before the management rebuilds the business. Meanwhile, unfortunately for current investors, the stock price may come under further pressure.

The conclusion of Las Vegas Sands

Things for the average citizen and the economy are likely to improve later in the year. But I still think it is too risky and early to own shares in casino operators in a long-term portfolio.

Finding the right balance between health and finances can be difficult for decision makers. And we do not yet know what kind of economic recovery will come in both Macau and Las Vegas. If the shutdown in the US or travel restrictions globally drag out over the middle of spring, the LVS share’s earnings will be further affected. After all, management is dependent on domestic and foreign tourists visiting casinos. In such a case, the share’s attractive dividend yield may also come under pressure.

In short, investors may discover that there may be other stocks that could play a potential recovery in our economy. But if you have a little extra venture capital, you can consider playing on the stocks.

Tezcan Gecgil has worked in investment management for over two decades in the United States and the United Kingdom. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) degree. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially likes to cancel weekly calls for income generation. At the time of writing, she had no position in any of the above-mentioned securities.