Casino stocks have always been a favorite of mine (to watch, not necessarily to buy). Having grown up near Atlantic City, I grew up in the gambling culture, and was fascinated both by the atmosphere created by casinos and the business itself. For some reason, a business where people come in and voluntarily give you their money seemed appealing!
The stocks of casino companies have been somewhat of a gamble over the years. For instance, Atlantic City-based Trump Entertainment went bankrupt several years ago, leaving shareholders with nothing. During the recent financial crisis, all casinos got hit hard, and shares of my personal favorite casino company, Las Vegas Sands Corp. (NYSE:LVS) sunk to a low of $1.38 at one point. Fast forward four years, and Las Vegas Sands Corp. (NYSE:LVS) is now a much healthier and more stable company. Shares trade for about $56 and pay a nice dividend of $1.40 annually, more than the stock was worth at the lows. I guess you could say that those who had the foresight to buy at the lows really hit the jackpot!
About Las Vegas Sands
My silly casino jokes aside, Las Vegas Sands Corp. (NYSE:LVS) really has done a phenomenal job of turning itself around. In fairness, the share price never should have dropped quite so much, but in early 2009, the market acted as if the sky were literally falling on anything related to discretionary spending.
Las Vegas Sands Corp. (NYSE:LVS) operates some of the most well-known Vegas casinos, including the Venetian, Sands, and Palazzo. They also have ventured into Asia, with the Venetian Macau, Sands Macau, and Four Seasons Macau. It is interesting to note that all of those were open before the financial crisis, and the amount of leverage on Sands’ balance sheet as a result of these is one of the main reasons their stock was treated particularly harshly by the market.
The company also operates a casino in Pennsylvania, and opened a resort in Singapore a few years ago called the Marina Bay Sands. Altogether the company’s revenues have climbed tremendously, from under $700 million in 2003 to over $13 billion expected this year.
A Stable Casino Company? No Way!
While there is really no debating the fact that Las Vegas Sands Corp. (NYSE:LVS) has a lot of debt on its balance sheet (and the debt level has increased in recent years as the company finances new projects in Asia), $10 billion in debt with $3 billion in annual revenues, as the company had in 2007, is a completely different thing than $10 billion in debt with over $11 billion in revenues. One scenario is sustainable and one is not. Additionally, just recently the company approved a $2 billion share buyback plan, which is generally a sign of a company of improved health.