Las Vegas Sands (NYSE:LVS) and Penn National Gaming (NASDAQ:PENN) make the cut on a Goldman Sachs list of 10 stocks with the biggest return potential over the next year.
The Wall Street bank released the list Wednesday and it includes some qualifiers. First, stocks in the group cannot be rated “sell” by Goldman. Second, the upside potential of the names is measured by June 30 closing prices relative to Goldman’s price targets.
LVS, the largest operator in Macau, and regional casino giant Penn National are the only two gaming equities on the Goldman list. The bank also published a list of the 10 stocks with the lowest return potential over the next year. No gaming names are featured on that list.
For Penn Stock, Plenty of Room for Redemption
For roughly a year following the coronavirus market low in March in 2020, Penn National was one of the best-performing gaming equities, surging from under $4 to a high of $142 in March 2021.
The air has come out of that trade in a big way and Wall Street analysts are divided on shares of the regional casino operator with some arguing the stock got too pricey too fast based on investors’ enthusiasm for iGaming and sports wagering. Year-to-date, Penn stock is off 17.58 percent and it’s shed more than 30 percent of its value in just the past 90 days.
Still, Goldman likes the name. In fact, the Ameristar operator ranks highest on the bank’s list of equities with the best return potential. From its June 30 close of $76.49 (the stock trades lower today), Penn has upside of almost 95 percent to Goldman’s price target, according to the bank.
Last month, the regional gaming company raised second-quarter revenue and adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) forecasts. Still, Penn stock is slumping following that update, trading at its lowest levels since December.
Don’t Leave Las Vegas Sands
Shares of LVS are off 14.68 percent year-to-date and are in the midst of a 10 percent slump over the past month as an uptick in coronavirus cases in mainland China is pressuring visitation to Macau – the market that accounts for the biggest chunk of the company’s EBITDA and revenue.
Sands owns five integrated resorts in the world’s largest casino hub where June gross gaming revenue (GGR) slumped due to lingering travel restrictions with Hong Kong and other health protocols. However, there are signs things could be opening up as travel with the neighboring Guangdong province will be relaxed starting July 10.
Goldman Sachs estimates shares of LVS can climb 36.6 percent from the June 30, good for the tenth spot on the bank’s list. Sands currently resides about 24 percent below its 52-week high of $66.76.
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