One casino stock could see some big upside ahead. Here’s why.
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Casino stocks have been on a wild ride so far this year.
Las Vegas Sands (NYSE: LVS), MGM Resorts (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN) are all up by double-digits so far this year—with LVS up 12.16% year-to-date, MGM up 21.64%, and WYNN up 14.14%—but over the last twelve months, both Las Vegas Sands and Wynn are down by -4.93% and -16.54%, respectively, while MGM is up just 6.61% over the last year.
Trading has been anything but predictable for these stocks over the last year as all three rely heavily on revenue from gaming traffic in Macau, which makes these casino stocks especially vulnerable to tensions from the ongoing trade war between the U.S. and China as well as the global slowdown in growth.
But despite the turbulence, one trader is betting big that one of these casino stocks is about to hit the jackpot.
This trader has put their money on Las Vegas Sands, which has lagged both MGM and Wynn Resorts so far this year. If this trader turns out to be right, the stock may be about to snap out of its slump and lead the group higher through the beginning of next year.
“Very early today, we saw about four times the average daily call volume, and that volume was mostly the result of one very large trade,” said Optimize Advisors President Michael Khouw.
“Somebody paid $3.20 for 13,000 of those [January 60-calls],” Khouw continued. “That represents 1.3 million shares of Las Vegas Sands.”
That means that this particular trader has placed a $4 million bet that Las Vegas Sands shares will climb at least 8.5% to the call’s break-even price of $63.20 per share by the January expiration date.
“This is somebody who is betting on a pretty good bounce after we’ve seen a little bit of weakness in Las Vegas Sands recently,” Khouw said.
This large bet comes on the heels of Deutsche Bank’s Carlo Santarelli upgrading LVS to a Buy, and boosting his price target for the stock to $70 – nearly 20% higher than the current price.
According to Santarelli, the company boasts a strong balance sheet and its valuation is “predicated primarily on choppy top line trends in Macau, which we believe are largely a function of geopolitical headwinds.”
The “bearish Macau sentiment has created an opportunistic entry point for medium- to longer-term oriented investors,” Santarelli wrote in a note to clients.
Santarelli believes that the Macau gaming authority will soon release gross gaming receipts that will show a positive trend and that “this cadence will alter what has been decidedly negative Macau sentiment.”
And in the near term, Santarelli said that Las Vegas Sands shares should see benefits at its Singapore Marina Bay Sands location “stemming from the [Hong Kong] protests and the longer-term benefits from the MBS hotel and amenities expansion.”