Las Vegas Sands (NYSE: LVS ) owns and operates resort properties in the United States, Macau, and Singapore. It derives its revenue from a mixture of hotel bookings and gambling revenue.
Today, let's look at three things that investors should be watching regarding Las Vegas Sands, as they will provide us better insight into the company.
1. Macau development
With macroeconomic weakness the norm since 2007 in the United States, Las Vegas Sands has had to look internationally for growth. Primarily Las Vegas Sands, along with rivals Wynn Resorts (Nasdaq: WYNN ) and MGM Resorts (NYSE: MGM ) , have set up shop in Macau in mainland China to take advantage of the rising number of middle-and-upper-class citizens in China and to attract tourists.
Las Vegas Sands already has three hotels in Macau and recently opened up its fourth in the region. Based on the company's most recent quarterly report filed back in April, all of its hotel properties (except for the Sands Macau) are showing double-digit casino revenue growth -- with the strongest growth coming from Macau -- specifically the Four Seasons Hotel Macau, which saw a 74% increase in net revenue in the latest quarter.
However, growth in China isn't guaranteed. Wynn Resorts reported earnings last week and noted deteriorating gaming revenue in Macau and Las Vegas. Overall revenue fell 9% with Macau revenue dipping 7%. It just goes to show that even high-growth China may not be immune to discretionary spending tightness.
2. Online gambling
In June, International Game Technology (NYSE: IGT ) and Bally Technologies (NYSE: BYI ) were granted the first online gaming licenses in the United States. Although there are still plenty of hurdles to clear, this move essentially clears the path for these two companies to move toward offering their services to casinos in the hope of taking a chunk of the $32.8 billion in online gaming revenue last year.
There's just one snafu with this online gambling idea... Las Vegas Sands CEO Sheldon Adelson isn't on board. Adelson has steadfastly been against the online legalization of gambling since the discussion began and could be on the wrong end of a winning trade if the approval process keeps streaming along. If approved, Las Vegas Sands would most likely join its peers in offering online gambling, but would be months, or even years, behind its peers in rolling out online gaming tools.
3. Global economic health
It probably goes without saying that any investor should stay abreast to the overall health of the global economy; but it's considerably more important when dealing with a sector that relies entirely on discretionary spending for its revenue.
Historically high unemployment rates in the United States coupled with stagnant wage growth have allowed resorts in Las Vegas to have small spurts of growth, but it hasn't been anything that would be regarded as sustainable. With European sovereign debt further weighing on spending and China's GDP growth slowing to its lowest levels in more than three years, it'd be only logical to expect resort and casino operators to struggle over the near term.
Take MGM, for example, which has lost money on an operational basis -- even including its MGM Macau property -- since 2008. It did report a sizable profit last year, but that was only because of the one-time gains from its MGM China IPO. It goes to show that much of the resort sector continues to struggle through a weak global economy.
Now that you know what to watch for, it should be easier to analyze Las Vegas Sands' successes and pitfalls in the future and hopefully give you a competitive investing edge.
If you're still craving even more info on Las Vegas Sands, I would recommend adding the stock to your free and personalized watchlist so you can keep up on all of the latest news with the company.
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