Shares of Las Vegas Sands (NYSE: LVS) have traded lower since the start of July — a period including favorable polling data for former President Trump. That could signal concern among market participants that should Trump reclaim the White House, the hard line he took against China in his first term will be a fixture of his second term.
Former President Donald Trump speaks at Trump Tower in Manhattan on May 31. Las Vegas Sands stock may be reacting to his shortening odds of winning a second term, but there’s more to the story. (Image: AP)
During Trump’s first term, 2018 was by far the worst year for stocks with the S&P 500 slumping 4.6% as the U.S. and China engaged in a tariff war. Macau stocks, including Sands China, bore the brunt of that weakness as the VanEck Gaming ETF (NYSE: BJK) — a basket of gaming equities which LVS and Sands China are members — plunged 26.7%.
In a report to clients today, Morgan Stanley analyst Stephen Grambling noted that Macau gaming stocks, including Sands, started lagging the S&P 500 about six months prior to Beijing unveiling retaliatory tariffs.
We believe the market could have muscle memory and be pricing in this outcome already, prompting lower multiples across the group that will continue at least through the election, if not after,” observed the analyst.
Grambling also pointed out that despite Trumps bellicose rhetoric aimed at Beijing and the US/China trade war, Macau gross gaming revenue (GGR) grew at a double-digit rate for most of the period following the tariff announcements and jumped 14% in 2018.
History May not Repeat for Sands Stock Under Trump
In financial markets, it’s frequently said that history doesn’t always repeat, but it often rhymes. That implies that a second Trump term could bring some risk for Macau stocks, including Las Vegas Sands, because the former president doesn’t hold back in his criticism of China.
However, a second Trump term could bring with a more congenial tone towards the world’s second-largest economy because Dr. Miriam Adelson — the largest individual LVS investor — has pledged to spend up to $100 million to get the former president reelected.
Now the owner of the Dallas Mavericks, Adelson has been a vocal supporter of Trump and he awarded her the presidential medal of freedom in 2018.
In 2016 and 2018, Adelson and her late husband, Sands founder and Chairman Sheldon Adelson, were the largest contributors to Republican candidates and conservative groups. In 2019, the late Adelson reportedly contacted the then president to warn him that an escalating trade with China could be harmful to the US economy and potentially drag on his 2020 reelection bid.
For Sands, Macau Stocks, It’s not All About Trump
While Sands and other Macau gaming equities have traded lower as Trumps 2024 odds have shortened, that might be nothing more than a coincidence. The more credible drag on Macau casino stocks is likely soft June GGR numbers and expectations that more of the same is in store this month.
In a new report, research firm CLSA pared its 2024 and 2025 GGR forecasts for the gaming enclave, citing a variety of region-specific factors. CLSA did not mention Trump.
“Factoring in promotional activity and rising payroll costs, we forecast the sector’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin (measured against net revenue) to contract 1.2 percentage points to 30.3 percent in second-quarter 2024,” according to the research firm.
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