In a note to investors, Wells Fargo said it expects Macau gaming revenue to fall between 30% and 34% in November compared to the year-ago month, according to StreetInsider.com. The analyst first previously estimated gaming revenue in the region would fall 30% in the month.
Wells Fargo analyst Cameron McKnight said recent checks suggest that average daily revenues were around 525 million Macau patacas in the week that ended on November 6. The revenue represents a 9% sequential decline and a 36% drop compared to the same week in 2014, despite the opening of Melco Crown's (MPEL) new Studio City resort.
"We remain on the sidelines on the Macau gaming names as estimates and valuations adjust to a 'new normal'' of: tighter government oversight, a recovery that is likely to be flatter than prior rebounds, and a weak Chinese economy, all of which are contributing to more muted revenue growth in Macau," McKnight wrote.
The Wells Fargo notes helped bring down shares of casino operators that operate in Macau, including Las Vegas Sands.
TheStreet Ratings team rates LAS VEGAS SANDS CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate LAS VEGAS SANDS CORP (LVS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- LVS, with its decline in revenue, underperformed when compared the industry average of 1.5%. Since the same quarter one year prior, revenues fell by 18.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- LAS VEGAS SANDS CORP's earnings per share declined by 21.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LAS VEGAS SANDS CORP increased its bottom line by earning $3.51 versus $2.79 in the prior year. For the next year, the market is expecting a contraction of 26.4% in earnings ($2.58 versus $3.51).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, LVS has underperformed the S&P 500 Index, declining 15.03% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Hotels, Restaurants & Leisure industry average. The net income has decreased by 22.7% when compared to the same quarter one year ago, dropping from $671.71 million to $519.36 million.
- You can view the full analysis from the report here: LVS