In betting parlance, it’s called a ‘catching a heater,’ when a table goes from cold to hot. Craps players live for it. Blackjack players wait for, and investors pray for it. Las Vagas sand could be the answer to those prayers.
Although named after the Nevada gaming mecca, Las Vegas Sands has largely depended on the Asia/Macau story of the last decade. When Macau banned junket-extended VIP credit in the fourth quarter of 2021, the high-roller segment that once dominated headlines collapsed. While casinos have long been known to court VIPs, margins on them weren’t generally as high, whether due to commissions, perks, and lower-edge games like baccarat. Meanwhile, Sands is actively exploring new development opportunities in Texas, the UAE, Thailand and Japan. Any one of which could meaningfully move the needle.
A “win” in any of those places costs little, given the 14x forward earnings multiple is based only on Macau and Singapore and sits at the lower end of the company’s own historical range, barely above the 10-year low of 13x.
Capital returns underline management’s confidence: the dividend has been reinstated, and roughly $6 billion remains on the buyback authorization; about 20% of the current market cap. Once the company begins to put some of that buyback authorization to work, that creates a strong tailwind.
That brings us to options prices (aka “implied volatility”). One-month implied volatility is around 28% versus a five-year average of ~39% and a five-year low of 24%. Cheap stock, capital return tailwind, and cheap options, plus the optionality if they successfully develop in any of the new markets they’re exploring. Cheap optionality is important here because, despite all the good things I just outlined, the one more ticklish area is the long-term moving averages.
Las Vegas Sands (LVS), YTD
The stock is cheap not only because revenues and earnings are expected to grow, but also because the shares have fallen; they’re down more than 30% since late November of last year. Seasoned traders look for inflection points. I believe Las Vagas Sands shares have found one. The 20-day has turned up and appears to be crossing the 50, and LVS has outperformed the S&P since the beginning of H2 26; those who want to try to call the rebound early should probably consider calls for the job.
For example, consider the November $50 strike calls, at just over $2/contract, or 4% of the current stock price; one captures earnings, the midterms, and a potential bearish-to-bullish reversal.
Disclosures: Tidal owns/holds all the securities mentioned in the article.
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