In the last 18 months, Casino stocks have been among the hardest hit on Wall Street. The ongoing pandemic resulted in worldwide lockdowns, a ban on international travel, and an economic recession which drove stocks in the travel, entertainment, tourism, energy, and retail sectors to multi-year lows.

However, as the vaccination rollout has gained pace in recent months, economies have started to reopen, making beaten-down stocks a top bet for contrarian and value investors.

Here, we look at two casino stocks in Las Vegas Sands (LVS) and Melco Resorts & Entertainment (MLCO) that are poised to gain over 70% in the next year, according to consensus price target estimates.

Las Vegas Sands

Las Vegas Sands develops, owns, and operates integrated resorts in the U.S. and Asia. Its portfolio of properties includes The Venetian Macao Resort Hotel, the Londoner Macao, The Parisian Macao, The Plaza Macao, and Four Seasons Hotel Macao, among many others. These properties integrate gaming, accommodations, entertainment, convention, exhibition facilities, and several other amenities.

Shares of Las Vegas Sands are trading 45% below their 52-week highs allowing investors to buy the dip. In the second quarter of 2021, the company reported sales of $1.7 billion and an adjusted loss per share of $0.13. Comparatively, analysts forecast the company to report revenue of $.42 billion and a loss of $0.25 per share.

The company explained that visitation in its Macao and Singapore regions continues to remain below historical levels due to COVID-19 related travel restrictions. Despite reduced visitations, LVS has managed to generate positive EBITDA in the two regions.

In 2019, the company generated $13.73 billion in sales and fell to $3.6 billion in 2020. Analysts expect sales to touch $6 billion in 2021 and $10.3 billion in 2022. Comparatively, its bottom line is also forecast to improve from a loss per share of $2.12 in 2020 to earnings of $2.02 in 2022.

We can see that revenue will not touch pre-COVID-19 levels until 2023. Analysts tracking the stock have a 12-month average price target of $62 which is 70% above its current trading price.

Melco Resorts & Entertainment

A company valued at a market cap of $5.3 billion, Melco Resorts & Entertainment owns several casino gaming and resort facilities in Europe and Asia. Its City of Dreams is an integrated casino resort with 516 gaming tables and 822 gaming machines with 2,170 suites as well as a 2000-seater wet stage performance theater, in addition to 25 restaurants and bars, 165 retail outlets, fitness clubs, spas, swimming pools, and meeting facilities.

In the second quarter of 2021, the company’s revenue more than tripled year over year to $566.5 million while EBITDA stood at $79.1 million, compared to a loss of $156 million in the prior-year period. Its net loss stood at $185.7 million or $0.39 per share which was wider than consensus estimates of a loss of $0.31 per share in the June quarter.

Melco’s sales in 2019 stood at $5.73 billion and it slumped to $1.72 billion last year. Analysts expect sales to touch $2.78 billion in 2021 and $4.5 billion in 2022. Its adjusted profit margins are poised to improve from a loss of $2.65 per share in 2020 to earnings of $0.28 per share in 2021.

Analysts tracking the stock have a 12-month average price target of $20.21, which is 85% above its current trading price.

LVS shares were trading at $36.56 per share on Thursday afternoon, down $1.76 (-4.59%). Year-to-date, LVS has declined -38.66%, versus a 18.35% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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