This Global Casino Stock Could Have 65% Upside

Las Vegas Sands (NYSE: LVS), a leading developer and operator of gaming resorts in the U.S. and Asia, has the combination of a strong chart and powerful fundamental growth story. Since its June 2013 low, shares have surged nearly 85%, and the company has strong revenue and earnings’ growth potential.

#-ad_banner-#Las Vegas Sands’ luxurious properties house classy convention centers, elaborate exhibition facilities, premium hotel accommodations, upscale retail outlets, and most importantly, world-class gaming and entertainment complexes. While the company obviously operates in Las Vegas, its facilities have become especially popular in Macau.

Macau is China’s only legal gambling district. An Asian casino hotspot, it has wrested the title of the world’s casino capital from Las Vegas.

Since 2002, when China opened Macau to foreign casino operators, gaming revenue has surged from less than $3 billion a year to $45 billion in 2013, which represents a 19% increase from 2012. In comparison, Las Vegas has struggled to recover from the financial crisis, and 2013 revenue was up just 3% year over year, to $6.4 billion.

This year, Deutsche Bank analysts project gambling revenue in Macau will rise 20% from 2013 levels. By 2017, analysts at brokerage firm CLSA expect $77 billion in revenues.

Las Vegas Sands is poised to cash in. The company is feverishly building new facilities to cater to this growing market. Its newest complex, called the Parisian Macau, set on Macau’s Cotai Strip, is set to open in late 2015. Management anticipates the new facility will “provide an outstanding platform for growth in the years ahead.”

Management is clearly confident about future growth, and traders have been cashing in.

In 2007, LVS peaked near $140. However, it fell victim to the global economic recession with its associated downturn in gambling revenue. Shares plummeted to an all-time low below $2 in 2009.

Shares steadily recovered from that low, delivering a nearly 40-fold return before peaking in the mid-$50s in late 2010. LVS then traded sideways from 2011 to 2012, testing support near $32 and resistance between $43 and $45 three times. Shares finally broke out above $45 in April 2012, but the breakout turned out to be a false one. LVS turned down and fleetingly violated $32 support.

Recovering off a July 2012 low, a major uptrend formed. Not unexpectedly, resistance was encountered in the $50 range for much of 2013. When LVS decisively moved past $60 in September, it surged to the low $80s before retreating in the January sell-off.

Shares bounced back in February and are now trading near their multi-year highs above $88. A band of support exists at just over $82, a level the stock consolidated at in January and late February before again breaking out.

With no nearby resistance in sight, shares could move higher. The next likely major resistance is the round-number psychological barrier of $100. At current levels, this price target represents 15% potential returns. Eventually, LVS may be able to challenge its all-time highs around $140.

The bullish technical outlook is supported by strong fundamentals.

Analysts project first-quarter 2014 revenue will increase 15.3% from the same period a year earlier to $3.8 billion. For the full year, analysts anticipate a 15.5% year-over-year increase to $15.9 billion.

The earnings outlook is equally optimistic. Analysts estimate first-quarter earnings will increase 28% from the year-earlier period, to $0.91 per share. For the full 2014 year, analysts expect earnings to rise 31% to $3.79 per share.

In addition to a bullish technical and fundamental outlook, the stock has a reasonable forward dividend yield of 2.3%. The company paid its first annual dividend of $1 in 2012. Management has doubled the payment in only two years, so the possibility is there for future dividend increases as earnings rise.

Risks to Consider: While Macau is developing quickly, an economic slowdown in China could stall growth. However, since the resort draws tourists from all over the region, the slowdown would have to affect many Asian economies to see the company’s fortunes significantly contract.

Action to Take –>
— Buy LVS at the market price
— Set stop-loss at $82.29, just below current support
— Set initial price target at $99.95 for a potential 15% gain by fall 2014

This article was originally published at
Casino Stock Could Surge 15% No Thanks to Vegas

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