Las Vegas Sands Shares Get Grinded

Shares of Las Vegas Sands (LVS) have dropped nearly 20% over the past two weeks, likely due to profit-taking and concerns about overvaluation. On Wednesday, media reports about a planned Macau casino IPO from a competitor spurred the negativity.

But given the lack of any changes in the company's fundamentals and its continued growth prospects, the selloff may have been overdone.

Before the recent slowdown, shares of Las Vegas Sands were on fire as investors grew excited over the growth prospects at the company's existing casinos and future developments in Macau and Las Vegas. The stock jumped from about $29 in November to a 52-week high of $73.14 on May 11.

However, the stock fell about 8% Wednesday, to $60.10, after several media outlets reported that Australia's Publishing & Broadcasting and Hong Kong-based Melco International Development are planning to offer about 20% of their Macau casino joint venture to the public, floating a roughly $1 billion stake. The IPO would be listed on the Nasdaq in the second half of this year, according to the reports, which cited anonymous sources.

The venture is developing two casino sites in Macau and recently bought a third property. Macau, located near Hong Kong, is the only area of China in which casino gambling is legal. The region is projected to eventually surpass Las Vegas as the world's largest gaming market.

The idea being floated around trading desks is that the IPO could hurt Las Vegas Sands because it brings yet another Macau option for investors' dollars -- especially since the new IPO would be a "pure play" on Macau. Currently, investors have three options for playing the Macau market. Las Vegas Sands is the only American company that has a casino open there today, but Wynn Resorts (WYNN) and MGM Mirage (MGM) both have exclusive permits to open casinos in the region.