Las Vegas Sands

Las Vegas Sands' second-quarter revenue decreased 0.7%. Total adjusted EBITDA margins declined 650 basis points to 35.5%, driven by a 750-basis-point decline in Macao to 24%. Shares were down 5% during July 22 after-hours trading.

Why it matters: We expect promotional headwinds in Macao to moderate into 2027 as Sands laps last year's increased investments and spending becomes more efficient. As this occurs, we think investor focus will shift to Sands' gains in Macao gaming share and its strong long-term position in the region. We believe investment to attract Macao visitation was about flat with last quarter. This reflected a lower hold (percent of a wager Sands keeps as sales), which reduced margins by 500 basis points, and the World Cup, which prompted high-value gamers to pause visits (unquantified). Despite the weak hold, Sands' Macao mass gaming revenue share increased 100 basis points from last year to 25%. We posit its standing was buoyed by its recently renovated Londoner property that grew revenue 11%.

The bottom line: We plan to reduce our $59-per-share fair value estimate for narrow-moat Las Vegas Sands by about $3 to account for softer second-quarter results and caution around the Iran war, which could result in higher travel costs. We see shares as attractive for long-term investors. We plan to reduce our 2026 revenue growth to 6%-7% from 10.5%, and our EBITDA margin to about 38.5% from 39.8% for the year. We still see 6% average annual revenue growth during 2027-35 with EBITDA margins of 43% by 2035, aided by Sands' portfolio development in the region. Sands is upgrading the rooms at its core Venetian property to keep its assets top of mind with visitors. We also remain constructive on Sands' $8 billion development of a fourth tower in Singapore, set to open in 2031, and think it should yield a midteens return on investment by 2033.

After reviewing Las Vegas Sands' second-quarter results, we have decreased our fair value estimate to $56 per share from $59 to account for softer second-quarter results and caution around the Iran war, which could result in higher travel costs. Our valuation implies a 10 times 2027 enterprise value/adjusted EBITDA multiple.

Las Vegas Sands' second-quarter revenue decreased 0.7%. Total adjusted EBITDA margin declined 650 basis points to 35.5%, driven by a 750-basis-point decline in Macao to 24%. We believe investment to attract Macao visitation was about flat with last quarter. This reflected a lower hold (percent of a wager Sands keeps as sales), which reduced margins by 500 basis points, and the World Cup, which prompted high-value gamers to pause visits (unquantified). We have reduced our 2026 revenue growth to 6% from 10%, and our adjusted EBITDA margin to 38.3% from 39.8% for the year. Over time, we see promotions cooling and higher-margin mass-player spending improving, aided by the government's desire to position the region as a global destination. That said, we estimate Macao EBITDA margins averaging 32%-33% during 2026-35 versus 35%-36% prior. Including renovations and development of a fourth tower, we project Marina Bay Sands' sales to increase at a 8% rate on average during the next 10 years. We model capital expenditure of $8 billion for the development of a fourth tower in Singapore. We project the fourth tower will open in 2031 and generate more than $1 billion in EBITDA in 2032.

We expect Sands China sales to grow 7% in 2026, followed by 6% average annual growth rate through 2030.

We see Las Vegas Sands having a narrow moat based on regulatory intangible assets, driven by its leading integrated brand and gaming concessions in Macao and Singapore. Historical operating success with its Las Vegas properties aided the company in winning one of only six gaming licenses handed out in Macao and one of two licenses awarded in Singapore, where government regulation creates meaningful barriers of entry for new competition. We believe this proven execution and integrated brand identity position the company to receive permits for its remaining undeveloped land in Cotai. The strength of these intangible assets is evident in the share captured in the key Macao and Singapore markets.

In Macao, favorable supply-and-demand dynamics support Las Vegas Sands' narrow moat. The Chinese government awarded only six gaming licenses for another 10 years, through the end of 2032. As a result, we see a continued controlled, limited supply of competition for the Macao market over the next decade. There are 1.4 billion people who live in China, but in the second quarter of 2026, only 6.9 million people from mainland China visited Macao. With a large number of people so close to Macao, it is reasonable to expect continued visitation and revenue growth for the region.

Given the attractive Macao environment, we are encouraged that Sands has invested over $3 billion in its Four Seasons and former Sands Cotai Central resort, converting it into a theme-based facility with upgraded premium suites called the Londoner. We believe these projects will further enhance its already strong positioning in the region. Also, Las Vegas Sands has committed an incremental $3.4 billion in capital expenditures in mostly nongaming asset development during the next 10 years as part of its renewed gaming concession in Macao.

Las Vegas Sands has a dominant presence in the supply-controlled Macao market. It has a 37% share of the Macao hotel room supply held by gaming operators and around 70% of the region's convention center capacity. It also has the most attractive locations on the Cotai Strip, the best location in Macao. As of March 31, 2026, Las Vegas Sands held a 29.3% EBITDA share among the six gaming concession operators in Macao.

In Singapore, only two gaming licenses were awarded in 2007 to Sands and Genting, and those two will maintain a duopoly through 2030. As with Macao, we think the government is unlikely to award any meaningful number of new gaming licenses in the future, given its regulatory approach to minimize gambling by its citizens. That said, management says new competition could even benefit existing operators, as having only two properties currently in the market may reduce the desire for repeat visits. Additionally, given the extremely strong occupancy (96% in the second quarter of 2026) of Las Vegas Sands' Singapore casino, Marina Bay Sands, the market should be able to support Sands' and Genting's additional room supply that we expect to start opening toward the end of this decade.

Las Vegas Sands sold its Las Vegas assets to Apollo and Vici for $6.25 billion in 2022. We view the Las Vegas region as lacking a moat due to lower regulatory barriers, which increase competition and lower returns on invested capital.

Government control prevents us from considering a wide economic moat. While an extremely unlikely scenario, the Chinese government could exercise its right to seize and take control of all gaming operations and facilities on the island, which would have a meaningful impact on the economic profit outlook for Las Vegas Sands.

Sands is well positioned to exploit growth opportunities in the attractive Asia casino market with a dominant position in Singapore (mid-60s EBITDA share) and China (high-20s EBITDA share).

The company has a narrow economic moat, thanks to its possession of one of only two licenses to operate casinos in Singapore and one of only six licenses to operate casinos in China.

Sands' continued investment in Macao ($3 billion during the next 10 years) and Singapore ($8 billion for a fourth tower modeled to open in 2031) supports its competitive position.

The Chinese government has full control over labor, table allocations, and travel visas and is regulating VIP play at casinos, which can result in volatile periods of growth for the region.

The company's Macao and Singapore assets stand to face competition from future casino growth in regions like Japan, South Korea, and the Philippines.

Macao's VIP gaming has shown a positive correlation to Chinese stock market and economic slowdowns in the past and is under regulatory pressure.