LVS: CRAPS VOLATILITY TOMORROW BUT COULD THERE BE A SILVER LINING?

Playing Las Vegas Sands into a quarter is a high stakes crapshoot. The stock is off almost 70% from its high. The chart shows the 1 year stock performance including annotations for big moves. During the past 12 months, LVS experienced 73 days where the stock moved over 1 standard deviation, including 9 two standard deviation moves, 2 three standard deviation moves, and 1 four standard deviation move. All four of the last earnings releases generated a 1 or 2 standard deviation move so expect some major volatility tomorrow.

What should we expect from earnings tonight after the close? Las Vegas won’t be pretty and is probably getting worse. Room rates are not done falling. I’m pretty sure the new Palazzo hotel/casino is struggling. The other potential negative for the quarter will be Macau margins due to escalating Junket commissions. However, Macau is where LVS may actually “roll the point” should they choose to discuss the July performance of Venetian Macau. Despite a so-so month for the market overall, I believe Venetian may have stolen some markets share. July foot traffic picked up dramatically in July as I wrote in my 7/24/08 post “MACAU UPDATE FROM THE GROUND”. If Vegas is salvageable and my intelligence on Venetian is correct, a short squeeze could push the volatility into the 1 or more standard deviation range, on the upside.

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