Please ensure Javascript is enabled for purposes of website accessibility

Why Las Vegas Sands Corp. Shares Popped 35% in 2017

By Travis Hoium - Updated Jan 12, 2018 at 2:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Macau's growth sent shares higher, but there are some concerning signs heading into 2018.

What happened 

Shares of gaming giant Las Vegas Sands Corp. (LVS -1.66%) jumped 34.8% in 2017, according to data provided by S&P Global Market Intelligence, as the company's main market of Macau saw a major recovery. But the company also lost market share, which could be a problem long-term if Macau's growth doesn't continue. 

So what 

Macau's 19.1% increase in gaming revenue to $33 billion helped drive a recovery at Las Vegas Sands and in gaming stocks more broadly. The previous two years had seen sharp declines in gaming volume, and gaming stocks were hit hard as a result. Rising overall revenue in Macau should be like a tide raising company revenue, and by extension shares of the stocks with exposure there. 

Macau's skyline over the water at dusk.

Image source: Getty Images.

What investors need to watch out for in 2018 is the loss of market share to new resorts from Wynn Resorts (WYNN -0.03%), Melco Resorts (MLCO 1.87%), MGM Resorts (MGM 1.97%), and SJM. For example, Venetian Macau and Sands Cotai Central saw casino revenue decline 7.9% and 12%, respectively, in the third quarter, despite a 21.8% increase in gaming revenue over the quarter. Las Vegas Sands is clearly losing market share, and if the trend continues, the gains we saw in 2017 may not hold up. 

Now what 

Las Vegas Sands is well-positioned long-term with resorts in Macau, Singapore, and the U.S. It has also indicated interest in building a new property in Japan if it can win a gaming license there. And with just $7.6 billion in net debt, the company has fairly low leverage as well. 

What investors will have to monitor in 2018 is the company's valuation, which may be getting steep if market share losses continue. As I'm writing, the company's P/E ratio is 26.6, and most of the company's established resorts saw revenue and EBITDA (a proxy for cash flow) fall in recent quarters. If Las Vegas Sands doesn't start taking back market share, we may not see such a positive result from shares in 2018. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Las Vegas Sands Stock Quote
Las Vegas Sands
LVS
$33.26 (-1.66%) $0.56
Wynn Resorts, Limited Stock Quote
Wynn Resorts, Limited
WYNN
$62.80 (-0.03%) $0.02
MGM Resorts International Stock Quote
MGM Resorts International
MGM
$33.65 (1.97%) $0.65
Melco Crown Entertainment Limited Stock Quote
Melco Crown Entertainment Limited
MLCO
$5.44 (1.87%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.