Posted on: January 4, 2023, 03:38h. 

Last updated on: January 4, 2023, 04:55h.

Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) were two of Wednesday’s best-performing gaming equities. That’s as the duo commanded another round of increased price targets from a sell-side analyst.

Wynn Macau
The Wynn Macau integrated resort. Sands and Wynn are among the gaming equities on which Bank of America raised price targets. (Image: YouTube)

In a note to clients on Wednesday, Bank of America analyst Shaun Kelley highlighted at least five gaming equities, sounding a more optimistic tone on Macau-centric names relative to US-focused counterparts. He boosted his price target on Sands to $52 from $46, while lifting his price objective on Wynn to $90 from $85. That helped LVS gain 5.19% on the day while Wynn jumped 6.19%. The analyst maintained “neutral” ratings on both stocks.

(We are) largely neutral with some caution on Gaming heading into 2023 (and) this is the first time in over a decade we haven’t had at least one Buy rating on one of the larger cap names in our group, as we await better risk-rewards,” wrote Kelley.

His commentary on Sands and Wynn arrives a day after Wells Fargo analyst Daniel Politzer upgraded the stocks and raised price targets on both — actions that helped Wynn in particular start 2023 on a strong note.

Brighter Macau Outlook Could Lift Sands, Wynn

Shares of Las Vegas Sands surged 27.71% in 2022, while Wynn Resorts finished modestly lower on an annual basis. In both cases, the casino operators were among the best-performing gaming equities and also handily beat the broader market.

Those impressive data points were accrued as Macau — the companies’ largest operating market — posted its worst year of gross gaming revenue (GGR) data since the special administrative (SAR) was opened to foreign competition nearly two decades ago.

The 2022 sturdiness of Sands and Wynn was the result of the former’s Marina Bay Sands in Singapore thriving, while the latter was supported by its Las Vegas Strip properties and Encore Boston Harbor. Additionally, financial markets are considered forward-looking indicators, meaning investors likely priced in a 2023 Macau recovery into some of the related gaming equities last year.

That recovery could materialize as China relented on its zero-COVID policy and travel restrictions to Macau are mostly relaxed. Still, analysts widely expect the first half of 2023 to be bumpy for Macau operators, with more earnest signs of recovery seen in the back half of the year.

Less Enthusiastic on Domestic Gaming Equities

Bank of America’s Kelley is less enthusiastic about domestic gaming equities. While he acknowledges the group is home to some attractive valuations, he expresses concern that sell-side estimates for those operators could be too high.

In the aforementioned report, he pared his price target on Penn Entertainment (NASDAQ: PENN) to $35 from $40 while trimming his price outlook on Caesars Entertainment (NASDAQ: CZR) to $50 from $55.

Caesars is the second-largest operator on the Las Vegas Strip and has an extensive portfolio of regional casinos, while Penn is the biggest regional gaming company in the US.