The gambling industry has been completely decimated over the past year as the pandemic has shut down resorts around the world and caused consumers to be more cautious with their entertainment spending. But Las Vegas Sands' (LVS 2.42%) stock hasn't suffered much at all, falling only about 15% from peaks in early 2020, so there seems to be a recovery priced into the stock already. 

Not only has casino revenue fallen over the past year, but online gambling has also become a very real competitor to the real-world casino. And Las Vegas Sands has almost no presence in that growing market. Is Las Vegas Sands now a value stock that will benefit from an economic recovery, or is this a company that the gambling world has passed by? Let's take a deeper look. 

Macao's brightly lit skyline  reflected in the bay.

Image source: Getty Images.

What Las Vegas Sands was

The last year doesn't really tell us much about what operations will look like as they open again, so let's start by looking at what revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) -- a proxy for cash flow from a resort -- looked like pre-pandemic. 

LVS Revenue (TTM) Chart

LVS Revenue (TTM) data by YCharts

At the end of 2019, Las Vegas Sands had an enterprise value (equity value plus debt outstanding) of $62.3 billion, or 11.3 times EBITDA. That'll be important to note as we talk about the company's future. 

The pandemic was a disaster

No matter how you look at it, the pandemic has been a disaster for Las Vegas Sands. The company saw revenue drop nearly 75%, and EBITDA went negative. 

LVS Revenue (TTM) Chart

LVS Revenue (TTM) data by YCharts

While some casino companies have relied on the U.S. market, which hasn't been hit as hard as Asia, Las Vegas Sands was highly reliant on Asia, which has had many more restrictions due to COVID-19. And the company is selling its Las Vegas properties for $6.25 billion, so in the future, it will be 100% reliant on Asia when that deal is closed. 

Relying on Asia can be a double-edged sword for casino operators. The market is extremely big and very profitable when operations are going well, but operators are also at the whim of government regulations and restrictions. Macao has gone through ups and downs depending on how open China's visas are to the region. Singapore pushed through a higher tax rate even after Las Vegas Sands committed to spending $3.3 billion to expand Marina Bay Sands

If Macao and Singapore gambling returns to 2019 levels sometime late this year or early next year, it would be great for gambling operations, but there's no guarantee that will happen, and we could see a very slow recovery in some countries where vaccine roll-outs aren't going as fast as they are in the U.S. 

Missing out on internet gambling

One of the bigger mistakes late CEO Sheldon Adelson made was fighting online gambling in the U.S. Las Vegas Sands didn't just fail to invest in the booming business; it actively fought its legalization. That puts the company well behind competitors. 

In 2020, online gambling reached $1.4 billion to $1.5 billion in gross gambling revenue in the U.S, according to H2 Gambling Capital, making up 20% of the market. Revenue is expected to grow rapidly as sports betting and iGaming are expanded across the U.S. with some expecting revenue to more than double. Las Vegas Sands may miss the boat entirely.

Is there any value in Las Vegas Sands? 

At today's stock price, Las Vegas Sands' enterprise value (EV) is $59.9 billion, not much lower than it was at the end of 2019 despite the pandemic. 

Even if we disregard the sale of Las Vegas operations, it'll be very difficult for Las Vegas Sands to return to the 11.3 EV/EBITDA multiple by the end of 2021. If Asian gamblers don't return in droves, the company may not reach 2019 EBITDA levels for years. 

As we've seen, real growth in the gambling industry is in online gambling. What I'm most worried about is that Las Vegas Sands has no presence in that business. That's why Las Vegas Sands stock isn't a buy today, but given the potential for a sharp pandemic recovery in 2021, I wouldn't short the stock either.