Las Vegas Sands (NYSE: LVS) stock price has been under pressure in the past few months as concerns about the casino industry remained. The stock has crashed by more than 17% in the past 12 months, underperforming other casino operators like Wynn, Caesars, and MGM Resorts. It is already down by almost 1% this year.

Still, there are some good news for the company because of the trends in Macao, its biggest market. The most recent report showed that Macao’s gaming revenue jumped by 67% in January from a year earlier. This rebound happened because China still had some COVID-19 restrictions in January last year, which impacted travel to Macao and other places.

Data revealed that gaming revenue rose to over $2.4 billion in January, signaling that the business will boom ahead of the Lunar New Year. Most importantly, the number of visitors to Macao has continued rising and has now reached its 2019 high. 

Macao’s gaming industry is doing well even as things in Mainland China worsened. House prices have plunged hard in the past few months while a court in Hong Kong ordered Evergrande to liquidate. Chinese stocks have also nosedived, with the Hang Seng and Shanghai Composite falling by more than 50% from their pandemic highs.

Macao’s gaming revenue rebound is a good thing for Las Vegas Sands. While this is an American company with properties at the Las Vegas strip, it still makes most of its revenue from Macao. 

For example, in the most recent quarter, Macao delivered $654 million in EBITDA, a high figure considering that the group’s total EBITDA in the quarter was over $630 million. In the earnings statement, Rob Goldstein, Las Vegas Sands CEO said:

The key challenge for Las Vegas Sands is that it is still an overvalued company even though the stock is down by double-digits in the past 12 months. It has a trailing PE ratio of 26.62, higher than the sector median of 14.25. Its forward PE multiple of 18.35 is also higher than the median estimate of 15.7. Other metrics like its EV to EBITDA (13.1) and price to book (8.31) are higher than the broader sector.

LVS chart by TradingView

The other challenge is that Las Vegas Sands’s technicals are not favourable now that it has formed a bearish flag pattern. In most periods, this pattern usually results in a bearish breakout. It is characterized by a rectangle pattern and a long line. 

It is also hovering at the 50-day moving average. Therefore, there is a likelihood that the stock will have a bearish breakout and retest the key support at $43.50, the lower side of the bearish flag pattern.

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