The shares of Las Vegas Sands (NYSE: LVS) have lost 35% in value since March 2021 as the coronavirus pandemic continued to weigh on tourist visitations in Macau. Notably, Sands’ Macau properties contribute almost 60% of revenues and earnings. Thus, the trajectory of Macau’s gaming business remains key to an uptick in Las Vegas Sands stock. Assisted by cost control measures and dividend suspension, the company burned just $100 million of operating cash in the first six months of 2021 – implying the $17 billion drop in the stock’s market capitalization since March 2021 is unwarranted. Our interactive dashboard analysis highlights Las Vegas Sands’ stock performance during the current crisis with that during the 2008 recession.
Timeline of 2020 Crisis So Far:
- 12/12/2019: Coronavirus cases first reported in China
- 1/31/2020: WHO declares a global health emergency.
- 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
- 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
- From 3/24/2020: S&P 500 recovers 100% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
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In contrast, here’s how LVS and the broader market performed during the 2007/2008 crisis.
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 1/1/2010: Initial recovery to levels before accelerated decline (around 9/1/2008)
Las Vegas Sands vs S&P 500 Performance Over 2007-08 Financial Crisis
LVS stock declined from levels of around $138 in October 2007 (pre-crisis peak) to levels of around $2.28 in March 2009 (as the markets bottomed out), implying LVS stock lost 98% from its approximate pre-crisis peak. It recovered post the 2008 crisis to levels of about $15 in early 2010 – rising by 555% between March 2009 and January 2010. In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.
Low cash burn rate highlights Las Vegas Sands’ strong fundamentals
Las Vegas Sands’ revenues grew by 17% from $11.7 billion in 2015 to $13.7 billion in 2019, primarily driven by strong growth in Macau. Also, the company’s margins expanded from 17% to 20%, resulting in a sizable 42% EPS growth from $2.47 in 2015 to $3.50 in 2019. In 2020, the company observed a 73% (y-o-y) contraction in revenues, reported a net loss of $1.6 billion, and burned $1.3 billion of operating cash. However, the company burned just $100 million in the first six months of 2021 assisted by cost control measures and suspension of dividends.
Phases of Covid-19 crisis:
- Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020: Fed stimulus suppresses near-term survival anxiety
- May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
- Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment
Considering the historical financial performance, low cash burn rate, and likelihood of a recovery in Macau, we believe that the stock is poised for long-term gains.
Do Las Vegas Sands’ peers offer better gains? Las Vegas Sands Stock Comparison With Peers summarizes how LVS compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.