JPMorgan Analyst Upgrades Las Vegas Sands, Optimistic About Macau Gaming License Renewal

A day after casino stock Las Vegas Sands Corp. LVS was hit with a Wall Street downgrade, the stock bounced back on Tuesday when it was upgraded by another analyst.

The Analyst: JPMorgan analyst Joseph Greff upgraded Las Vegas Sands from Neutral to Overweight and raised his price target from $36 to $48.

Related Link: Las Vegas Pandemic Recovery Continues To Outpace Macau's, Casino Analyst Says

The Thesis: In the upgrade note, Greff said Sands has been a major pandemic reopening trade laggard and negativity surrounding the company's Macau business is fully priced into the stock.

"We note that the current level of investor apathy toward the Macau sector is the worst of any subsector within our coverage universe in our 22 plus years of covering gaming and lodging," Greff said.

Meanwhile, uncertainty and underperformance in Macau are a big part of Bank of America analyst Shaun Kelley's bearish thesis on Sands. On Monday, Kelley downgraded Las Vegas Sands from Neutral to Underperform and cut his price target from $46 to $40.

"Long-term, we think the ongoing concession process for Macau gaming licenses and geopolitical uncertainty could result in 1) higher license fees or investment, 2) lower returns on capital and 3) less dividend or valuation support relative pre-COVID," Kelley said in his downgrade note.

Greff, on the other hand, said Tuesday that he's optimistic about the license renewal process in Macau. JPMorgan's base case expectation is that all six Macau casino licenses will be renewed for between five and 10 years, and no new licenses will be granted.

For now, he said investors should expect Macau gross gaming revenue to remain at around 30% to 35% of pre-pandemic levels, but travel mobility could improve in China following the Beijing Winter Olympics in February.

Benzinga's Take: Greff and Kelley are two analysts looking at the same uncertain and underperforming Macau business for Sands and drawing two completely different conclusions on the stock. Kelley sees Macau as a reason to avoid Las Vegas Sands shares, while Greff sees a potential rebound in Macau as a reason to buy.

Shares of Las Vegas Sands were trading at 39.26 on Tuesday afternoon, up 7.77%

See Also: 10 Worst Performing S&P 500 Stocks Of 2021

Photo: Courtesy of Jermaine Ho on Flickr