Investors searching for growth stocks trading at reasonable prices have plenty to pick from in the consumer discretionary sector, including Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN).
In a recent note to clients, Goldman Sachs offered up growth at reasonable price (GARP) names with the two casino stocks making the list. The duo are the only gaming equities mentioned in the bank’s research.
We offer a screen of Growth at a Reasonable Price (‘GARP’) stocks for investors looking to add length to Growth but who are wary of valuations,” David Kostin, Goldman’s head of US equity strategy, wrote in the report.
With just 13 trading days left in 2023, shares of Sands are lower by 0.96% year-to-date while Wynn is higher by 4.28% with both gaming stocks badly trailing the S&P 500. Goldman’s thesis that shares of the two casino operators could offer upside in 2024 could be fortified by the notion that Macau’s gross gaming revenue (GGR) recovery will continue accelerating in the new year. The Macau arms of Sands and Wynn combine to operate seven integrated resorts in the special administrative region (SAR).
Sands, Wynn Could Be Too Cheap to Ignore
Goldman’s outlook on inexpensive growth stocks arrived at a time when other market observers believe stocks with Macau exposure are unusually cheap and suffering through overly harsh repudiation.
Macau concessionaires are trading at rock-bottom valuations. As of December 4, shares of five of the six concessionaires, including Sands China, were saddled with declines of at least 20% since January 1, a week before the SAR reopened following harsh coronavirus travel restrictions. On a year-to-date basis as of December 4, only MGM China was in the green while both Sands China and Wynn Macau were saddled with steep year-to-date losses.
Market participants’ treatment of Sands and Wynn stocks this year belies expectations that the duo will generate improved earnings and revenue next year. Goldman estimates that the median stock in its GARP screen, which includes the two gaming equities, will grow earnings by 13% next year compared to 8% for the median S&P 500 component.
Beyond Macau, the immensely profitable Marina Bay Sands in Singapore remains a growth engine for LVS while Wynn’s Las Vegas properties and Encore Boston Harbor have notched record quarterly results this year.
Sands, Wynn Have 2024 Catalysts
Data confirm there are value traits in shares of Sands and Wynn. For example, the median stock in the Goldman GARP group trades at 16 times earnings compared to 17 times for the median S&P 500 member firm.
Additionally, both names have catalysts that could unfold throughout 2024. Both LVS and Wynn are considered among the leading contenders for the three downstate casino licenses New York regulators could award at some point next year.
That’s on top of the operators’ expansion plans at their Asia-Pacific integrated resorts and Wynn making progress on its upcoming casino hotel in the United Arab Emirates (UAE).
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