LVS - LVS and WYNN are fairly valued at current price: Jefferies

2023-06-12 09:00:39 ET

Equity analysts at research firm Jefferies downgraded last Thursday two notable names in the online casino space. Las Vegas Sands Corp ( NYSE: LVS ) and Wynn Resorts Limited ( NASDAQ: WYNN ) were each taken lower to a “hold” rating.

In his research note, David Katz agreed that continued recovery in Macau could remain a benefit for both casino stocks, but said:

We believe these dynamics are relatively well understood by the market and approximately priced in at present levels.

The timing of the downgrade also coincides with growing popularity of crypto casinos that represents a longer-term threat to traditional casinos.

Although the analyst did not mention the rising competition in his note, Katz trimmed his price target on LVS from $69 to $65. In WYNN, Katz now sees upside to $114, representing a notable trim from a prior target of $135.

Katz recommends against adding to LVS or WYNN

Through May 2023, David Katz noted, gross gaming revenue stands at about 60% of pre-pandemic levels.

The Jefferies analyst expects Las Vegas Sands to grow its EBITDA margin by 29% in 2024 and Wynn by a whopping 52%. Still, his research note reads:

Capital set-ups for both names are positive as well. However, our ultimate point is that we consider the upside less compelling at present levels than at the time of our upgrade.

According to Katz, it’s reasonable for investors who already own these two casino stocks to keep their position. He did, however, caution against adding.

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