Key Points
- The casino and hotel operator fell 5% on Wednesday after billionaire Mark Cuban sold his majority stake in the NBA franchise.
- To help fund the purchase, an insider is offering to sell 46.3 million Las Vegas Sands shares.
- LVS has one of the lowest forward P/E ratios in the large-mid casino and gaming space.
- 5 stocks we like better than Las Vegas Sands
Dallas Mavericks purchase turns LVS stock into a cheaper bet
In gambling terms, the Money Line on Las Vegas Sands Corp. NYSE: LVS just got more compelling.
Shares of the casino and hotel operator fell 5% on Wednesday after billionaire Mark Cuban sold his majority stake in the Dallas Mavericks National Basketball Association (NBA) franchise at a $3.5 billion valuation, more than 12-times what he bought the team for in 2000. What does one thing have to do with another?
The Shark Tank regular sold his interest to the Adelson family, a wealthy casino magnate known for its philanthropy and Republican party donations. It is a family that includes Dr. Miriam Adelson, who received the Medal of Freedom from then President Trump in 2018, and is the fifth richest woman in the world according to Forbes.
To help fund the purchase of the Mavs, Ms. Adelson is offering to sell approximately 46.3 million Las Vegas Sands shares from her personal portfolio and a family trust at $44.00 per share. Once completed, the 78-year old will still own roughly 50% of the company.
The eye-popping deal, the second largest in NBA history, has fueled speculation that Mr. Cuban is making a 2024 run for the U.S. Presidency. It also raised eyebrows for being outside the ‘wheelhouse’ of the Adelson family, but perhaps it shouldn’t have. Las Vegas Sands has been pursuing growth investments outside of its home state after dumping $6.25 billion worth of Vegas properties last year.
A year ago, Mr. Cuban dropped a hint at a potential transaction when he expressed interest in teaming up with Las Vegas Sands to build a new arena/casino/resort hybrid. The dream property would face plenty of regulatory scrutiny around Texas gambling laws and other local issues.
What could also face scrutiny in the weeks ahead is the valuation on Las Vegas Sands equity. After climbing above $47 billion in April 2023, the company has seen its value drop to around $35 billion. Since Ms. Adelson’s insider selling was driven by an external investment rather than a commentary on Las Vegas Sands’ growth prospects, the 27% pullback may make shareholders want to ‘double down’.
How are Las Vegas Sands’ fundamentals?
For LVS to have been heading south prior to the insider stock offering is a non-sequitur. In mid-October, the company posted one of its strongest quarters in recent history. The stock gapped up in good volume, ran above $50, and then profit taking set in.
Led by a sixfold increase in Macau revenue, third quarter revenue jumped 180% year-over-year to $2.8 billion. Adjusted earnings per share (EPS) more than doubled to $0.55, a reflection of the ongoing recovery at its properties in Macau and Singapore.
Going forward, LVS should continue to derive growth from the removal of travel restrictions in and around China where its crown jewel Macau casinos are located. With Las Vegas exposure now eliminated, Macau tourism and favorable gaming authority rulings (being granted new casino licenses) will be the company’s most important long-term growth drivers. Over 60% of its profits come from Macau with the rest from Singapore. Don’t be fooled by the name, Las Vegas Sands stock is a bet on the Asian casino industry.
Is LVS stock undervalued?
Even though LVS is undervalued, investors may wish to hold off before throwing down their chips. That’s because as of Thursday afternoon, the stock was trading a couple bucks above Ms. Adelson’s $44.00 offer. And with the deal not expected to close until December 1st, LVS could face selling pressure through Friday’s session.
Once next week rolls around, though, all bets are off. If the market kicks off the last month of the year in the holiday spirit, LVS could be among the most popular low-priced gifts.
Before you consider Las Vegas Sands, you’ll want to hear this.
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