Analyst Note| Dan Wasiolek |
Las Vegas Sands’ second-quarter earnings reflected the difficulties the gaming industry faces with travel and group sizes still restricted in many locations, even as its markets enter early stages of recovery. While it continues to invest in Macau (59% of 2019 EBITDA) and Singapore (31% of 2019 EBITDA), which bolsters the regulatory intangible advantage that drives Sands’ narrow moat given meaningful barriers to entry with limited licenses available, the closures of some locations and the limitations surrounding non-gambling related revenue sources lead to a below-expectations second quarter. Revenue amounted to just $98 million, down 97% year over year, and it posted an operating loss of $922 million--lagging CapIQ’s consensus mean projection of about $550 million and a $610 million loss, respectively. We may edge down our $62 fair value estimate modestly, but still view shares as undervalued.