JPMorgan Downgrades Las Vegas Sands, Thinks Investors Might Be Confused

J.P. Morgan’s Joseph Greff believes that Las Vegas Sands Corp.’s LVS stock valuation could be limited to a tight range till there is more evidence of stabilization in the Macau market and the company’s properties in the region.

Greff downgraded the rating on Las Vegas Sands from Overweight to Neutral, while raising the price target from $46 to $52.

Stock Outperforms

“Our new rating reflects our belief that the stock, at current levels, has gotten ahead of itself relative to elevated investor expectations for improving Macau fundamentals,” the analyst explained.

Greff believes that investors could potentially be confused regarding sequential improvements that have been driven by seasonality, with absolute improvement, which entails seasonally adjusted results.

Upside Limited

“Our updated projections reflect further sequential improvements, a sizable amount of labor-related opex shift from its same-store base of Macau properties to Parisian, a 10 percent year one EBITDA ROI at Parisian, and very minimal market share losses related to new competition,” Greff stated.

For the stock to have even 20 percent upside, the 2017 Macau EBITDA estimate of $400 million would prove too low.

“Overall, we see more share price upside, better growth, more reasonable valuations, and dividend/free cash flow yields in more U.S. centric game names at the present time,” the analyst added.