Better Buy: Caesars Entertainment or Las Vegas Sands Stock?

With the casino industry thriving in Las Vegas, and Macao resuming operations after COVID restrictions were lifted, casino stocks appear to be in store for some much-needed recovery. Today, we'll take a look at two players in the space and determine which makes a better buy based on recent performance.

The case for Caesars Entertainment

Net revenue reached $2.8 billion for Caesars Entertainment (CZR -1.40%) last quarter, 9% higher than fourth-quarter 2021. Most impressively, same-store sales soared 65% higher as visitation on the Las Vegas Strip approaches pre-pandemic levels.

Still unprofitable, Caesars finished Q4 with a net loss of $148 million. But that was much improved from its prior-year loss of $434 million, indicating that a recovery is on the horizon. Furthermore, Las Vegas occupancy for Caesars last quarter reached 95.5% for the first time since the start of the pandemic. 

Performance for Caesars Entertainment's digital segment improved sequentially throughout 2022, with Q4 producing its best quarter of the year. In fact, digital revenue grew over 100% year over year last quarter, and Caesars' digital segment enjoyed its smallest EBITDA loss since 2001.

Although full-year revenue ended at $10.8 billion, a 12.5% improvement over 2021, Caesars ultimately took a net loss of $899 million in 2022. Bad weather in the U.S. Midwest resulted in missed revenue last December, and digital losses for the year grew bigger than expected. 

Undeterred, CEO Tom Reeg anticipates both sports betting and online gambling to finish the year "EBITDA positive." And current resort reservations outpace 2019 levels despite higher room and amenities prices. 

While the tide appears to be turning for Caesars Entertainment, its shares are still down 57% from their September 2021 highs. 

The case for Las Vegas Sands

Though its corporate headquarters sits in Las Vegas, Nevada, Las Vegas Sands (LVS -8.66%) operates exclusively in Asia, including five resorts in Macao and one in Singapore. Thanks to proceeds from the sale of its Las Vegas properties and operations last year, the company ended 2022 with $1.83 billion in profit. 

Sands' net revenue climbed 11% year over year to $1.12 billion in Q4, and the company also collected a $3.6 billion payment from the sale of its Las Vegas assets. In 2021, Las Vegas Sands announced an agreement to sell The Venetian, Palazzo, and Venetian Expo in order to further invest in Asia.

Success at the Marina Bay Sands resort in Singapore contributed to the revenue growth last quarter, where gains were observed in room, food and beverage, and convention sales. CEO Rob Goldstein described the property as "unrivaled in that part of the world" during the Q4 earnings call last month, suggesting that soaring demand outpaces Marina Bay's price increases.

While revenue grew last quarter for Las Vegas Sands, so did operating expenses. It's no big surprise, considering that five out of six of Sands' resorts operate in a region crippled by COVID restrictions until recently. Sands' Q4 operating loss increased 20% year over year, and its full-year 2022 operating loss grew 15%. 

In other words, had it not been for the $3.6 billion payment from the divestiture of its Las Vegas properties, Sands would have endured a $1.77 billion loss last year. Despite the long road to profitability ahead, Goldstein is encouraged, saying that "Macao's future is bright" and citing it as "the largest integrated resort market globally."

Las Vegas Sands stock is down more than 20% from its pre-pandemic January 2020 highs.

Which casino stock is the better buy right now?

Since Caesars Entertainment was unprofitable in 2022, and Las Vegas Sands was only profitable for the year from selling its Las Vegas assets, I've compared the two stocks using their price-to-sales (P/S) and forward price-to-earnings (P/E) ratios.

Table data: Yahoo! Finance.

With a much lower price-to-sales ratio and forward price-to-earnings ratio, Caesars Entertainment stock is today's clear winner. In fact, it could be argued based on such a relatively high P/S and forward P/E ratio that Las Vegas Sands stock is overpriced at current levels. Conversely, with a much more appealing P/S and forward P/E ratio, Caesars Entertainment stock could be considered undervalued at its current share price.

Another factor to consider is diversification amid global uncertainty. While Caesars Entertainment earns revenue from multiple casino markets across the U.S., Canada, and Dubai, Las Vegas Sands only operates in Asia -- primarily in Macao. Considering how pandemics and conflicts can unevenly impact global markets, I'd rather be invested in a more geographically diverse company for the long haul.