We recently compiled a list of the 10 Undervalued Cyclical Stocks to Buy According to Analysts. In this article, we are going to take a look at where Las Vegas Sands Corp. (NYSE:LVS) stands against the other undervalued cyclical stocks.
Economic growth in the U.S. surpassed forecasts in the second quarter, driven by robust consumer demand and increased government expenditure. The real gross domestic product, a measure of all goods and services produced, grew at an annualized rate of 2.8%, beating consensus estimates of 1.4%. It also significantly improved from the 1.6% GDP growth recorded in the first quarter.
Nevertheless, the economy has slowed in the year’s second half due to disappointing economic data. Private sector payrolls grew at the weakest pace in more than 3½ years in August, providing yet another sign of a deteriorating labor market, according to ADP. The weakness is a concern, especially for cyclical companies that experience the largest fluctuations in sales and profits as the economy strengthens or weakens.
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Since August was the weakest month for job growth since 2011, there are growing concerns that the U.S. economy is cooling off. Early indication is that hiring has slowed from the blistering pace following the COVID pandemic. Such weakness could spell more doom to cyclical companies in the materials, restaurant, and consumer food segments as prospects depend on consumers’ purchasing power.
Jamie Dimon, the Chief Executive Officer JPMorgan, is not ruling out stagflation even as the Fed cuts interest rates to try and support the economy. Dimon is concerned that a wave of inflationary pressures is approaching, including greater deficits and more spending on infrastructure, which will keep adding strain to an economy that is still recovering from the effects of rising interest rates. In August, he mentioned that the chances of a “soft landing” were estimated to be between 35% and 40%, suggesting that a recession is the more probable scenario.
Weak employment figures for July raised concerns that the U.S. economy might be on the verge of a downturn, sending the stock market lower. Likewise, August employment numbers sent the U.S. equity market a lower kick, starting the worst months for stocks.
While Fundstrat’s equity strategist, Tom Lee, expects the stock market to run into some turbulence on valuation levels getting out of hand, he expects pullbacks to present some of the best buying opportunities. Lee expects up to 10% pullbacks as investors navigate one of the most important months for stocks.
While the analyst believes investors should be cautious over the next eight weeks, it might be one of the best times to pay attention to undervalued cyclical stocks to buy. Cyclical stocks are poised to receive a significant boost on the U.S. Federal Reserve cutting interest rates in a bid to prevent the economy from plunging into recession.
While Lee believes the uncertainty over the U.S. election could add to the layer of uncertainty, any up to 10% pullback would provide an ideal entry-level, especially for value cyclical stocks.
In an interview with CNBC, Carl Weinberg, Chief Economist at High-Frequency Economics, reiterated it would take much more than the current weakness in the economy for the Fed to trigger a panicked 50 basis point rate cut. Nevertheless, any panic that comes into play with the Fed cutting by more than 25 basis points would present an opportunity to continue holding the best cyclical stocks that remain resilient amid such uncertainties.
Our Methodology
For this article, we scoured through Yahoo Finance stock screener to find stocks in all the cyclical sectors with price-earning ratios of under 15. Next, we shortlisted our list to 10 stocks with Buy or better ratings with the highest average analyst price targets on September 11. The analyst ratings were taken from TipRanks, and the stocks are listed in ascending order based on their average price target upside potential.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The dazzling Las Vegas Strip lined with luxury Integrated Resorts, seen from a high elevation.
Las Vegas Sands Corp. (NYSE:LVS)
Forward PE ratio as of September 11: 13.51
Average Analyst Price Target Upside Potential: 34.29%
Number of Hedge Fund Holders: 40
Based in Las Vegas, Nevada, Las Vegas Sands Corp. (NYSE:LVS) and its subsidiaries are crucial players in the resorts and casinos business; it operates integrated resorts in Macao and Singapore. Some of its high-profile brands include The Venetian Macao Resort Hotel, the Londoner Macao, The Parisian Macao, The Plaza Macao, and Four Seasons Hotel Macao.
Las Vegas Sands Corp. (NYSE:LVS) is one of the undervalued cyclical stocks to buy, according to analysts, as the company is increasingly benefiting from a booming resorts and casinos business. Financial and operating results in the second quarter underlined growth in both Macao and Singapore compared to the second quarter of 2023.
Net revenue in the quarter totaled $2.76 billion compared to $4.54 billion in the prior quarter, as Net income came in at $424 million, up from $368 million as of Q2 of 2023. The company exited the quarter with unrestricted cash balances of $4.71 billion.
Solid financial position and industry-leading cash flow support Las Vegas Sands’ investment and spending plans in Macao and Singapore in pursuit of new opportunities for growth and shareholder value.
Las Vegas Sands Corp. (NYSE:LVS) returns excess capital to shareholders, repurchasing a $400 million share in the second quarter. While trading at a price-to-earnings multiple of 13, the company rewards investors with a solid 2% dividend yield, underlining why it is one of the best undervalued cyclical stocks to buy, according to analysts.
Hedge fund sentiment toward Las Vegas Sands Corp. (NYSE:LVS) turned negative in the second quarter of 2024, with the number of hedge funds holding positions in the stock dropping to 40 from 52 in the first quarter. Viking Global is the most dominant shareholder in the company as of Q2 of 2024. In the quarter, the firm increased its stake by 17% to 19.79 million shares worth $875.51 million.
Las Vegas Sands is currently rated as a Buy based by 14 Wall Street analysts with an average price target of $52.75, implying 34.29% upside potential.
Overall LVS ranks 8th on our list of the best undervalued cyclical stocks to buy. While we acknowledge the potential of LVS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LVS, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.