The shares of Las Vegas Sands managed to rise by 26.77% year-to-date, highlighting the projections for the expected Macau gambling sector rebound. According to some market analysts, the company’s stock has the potential to increase in value even more.

In a new report to its clients, Morgan Stanley analyst Stephen Grambling shared that Las Vegas Sands was the firm’s top casino stock pick. This statement has been made right before the company’s second-quarter earnings report to be published on July 19th. As confirmed by Mr. Grambling, the Macau gambling industry, where the company’s Sands China unit operates five casino resorts, has played a significant role in the market analysts’ favorable projections for the stock.

The Morgan Stanley analysts explained that Las Vegas Sands had historically provided the mass market leader with approximately a quarter (25%) of its market share before the Covid-19 pandemic outbreak. The company now expects to see its share improve over time, as it invested about $2 billion across two properties in Macau during the coronavirus pandemic. The other majority property of the operator – the one in Singapore – is still generating positive trends while also enjoying a pristine balance sheet at the end of the first fiscal quarter of 2023.

The analyst rated Las Vegas Sands’ $71 price target as “overweight”, as it implies a further 16.3% increase from the company’s share price on July 14th market closure and even slightly exceeds the $69.78 consensus price forecast.

Macau Gambling Market Slowly Recovers from Covid-19-Related Restrictions

Sands China is one of the six casino concessionaires in Macau. So far this year, the group has managed to deliver excellent results for its investors as the gambling industry in the special administrative region (SAR) rebounds from the consequences of the Covid-19 pandemic restrictions imposed by the Chinese Communist Party (CCP) in the three years since the pandemic outbreak.

For the time being, the performance of the casino companies’ stocks was not linear. However, Sands’ experience in commanding and expanding its market share among mass and premium mass players at a time when the high-roller spending’s recovery is not that quick, is playing an important role, as the company is believed to have the potential to become a leader among equities in Macau.

According to market analysts, some back-half catalysts could help Las Vegas Sands, considering the gross gaming revenue (GGR) of the special administrative region has been expected to return to its 2019 levels at some point. That metric approached approximately 65% of the pre-Covid-19 levels in June 2023.

Morgan Stanley’s analysts also noted that ongoing strength at Marina Bay Sands in Singapore – the only casino resort operated by Las Vegas Sands outside of Macau – has also added to the company’s 2023 stock increase. In any case, analysts and investors are set to start assessing 2024 catalysts for the company. Those catalysts could include the announcement of a share repurchase program, the resumption of Las Vegas Sands’ dividend that has been suspended for three years now, as well as the potential of the company winning one of the three casino licenses in the New York City area.

Las Vegas Sands was previously a dominant dividend player in the gambling industry, with executives having praised a preference for resuming the payout to share repurchases. That view, however, could change. Apart from that, the gambling and casino company is likely to need special permission from some of its creditors in order to restart the dividend that has been suspended since 2020.