With challenges expected in 2024 for some domestic-heavy casino operators, Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) could be gaming stock winners in the new year.
The Wynn Macau integrated resort. Wynn and Las Vegas Sands could be casino stock winners in 2024. (Image: Chris McGrath/Getty Images)
That’s the outlook of Deutsche Bank analyst Carlo Santarelli, who in a new report to clients highlighted Sands and Wynn as his top casino stock ideas for 2024. He applied a $124 price target to Wynn, implying upside of nearly 44% over the next year. His price forecast on LVS is $65, which implies a potential 12-month jump of 36%.
The analyst’s bull thesis on the two casino stocks is rooted in Macau, where the operators’ China units combine to run seven integrated resorts.
We see the clearest path to growth and upward revisions here (Macau), with valuations more attractive than they have been in some time,” wrote Santarelli.
The analyst pointed out that fundamental and macroeconomic headwinds, including capital spending in Macau and China’s weakening economy, are priced into shares of LVS and Wynn. Additionally, periods of softness in the Chinese economy have rarely been detrimental to Macau gross gaming revenue (GGR).
‘Best Opportunities’ Among Casino Stocks
Among US-based companies outside of the technology sector, Sands and Wynn are among the most China-dependent, but that could be a good thing in 2024.
Currently, LVS operates no domestic casino hotels while Wynn runs its namesake property and Encore on the Las Vegas Strip and Encore Boston, but the company relies on Macau for the bulk of its earnings and revenue. That could be advantageous amid expectations the US consumer will reduce wagering-related spending next year.
“We think it will be a challenging fundamental year, for the domestic operators, on a same-store basis, in which earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) growth will be hard to come by, though we believe valuations largely reflect this and Consensus forecasts embed some modicum of a slowdown, thereby presenting some opportunities,” observed Santarelli.
The operators’ focus on markets outside the US is among the reasons why Sands and Wynn could be casino stock leaders in 2024.
“We believe WYNN and LVS represent the best opportunities for outperformance in 2024,” added the Deutsche Bank analyst.
For Sands, Wynn, Achievable Targets
Potentially adding to the case for LVS and Wynn being leaders among casino stocks in 2024 is the point that consensus top and bottom line estimates on the operators are “rational and achievable,” according to Santarelli.
Plus, in a situation that’s perplexing some analysts and investors, shares of Macau concessionaires are trading at rock-bottom valuations. Excluding MGM China, shares of Macau operators trade today well below where they were at the start of the year despite soaring GGR over the course of 2023.
Both Sands and Wynn have reached “normalized trading levels on normalized earnings,” concluded Santarelli.
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