Morgan Stanley Won't Bet On Las Vegas Sands This Year

Las Vegas Sands Corp. LVS has outperformed peers with a near 30% surge since August. One analyst team thinks its luck has run out.

The Rating

Morgan Stanley analysts Thomas Allen and Praveen Choudhary downgraded Las Vegas Sands to Equal-Weight but raised their price target from $65 to $72.

The Thesis

The analysts remain bullish on the U.S. industry, given that recent growth in sports betting has not yet been priced in. However, they expect the Hong Kong market to profit more from a Macau inflection than the U.S. market will. One U.S. stock, in particular, may fail to meet expectations.

“LVS remains the mass market play on Macau, with 29% segment share vs. peers 10-17%, and should benefit in 2020 from adding new large suites,” Allen and Choudhary wrote in a report.

However, consensus anticipates outsized mass market growth in 2020 that Morgan Stanley considers unreasonable.

“There's risk mass growth could come in even lower as net rooms growth will be essentially flat and hotel occupancies have surpassed Vegas, with the Macau tourism office suggesting last week that visitation could decline in 2020,” the analysts wrote.

They prefer Wynn Resorts, Limited WYNN, given expectations of a VIP recovery through 2021.

Price Action

At time of publication, Las Vegas Sands shares traded down 4% at $71.01.

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