Despite doubts about the strength of the gambling scene on the Vegas Strip, shares of gaming concern Las Vegas Sands Corp. (NYSE: LVS, Stock Forum) are maintaining a healthy uptrend. On Oct. 29, the security benefited from a better-than-expected quarterly earnings report. Specifically, LVS posted adjusted earnings of three cents per share, versus Wall Street expectations for a loss of a penny per share. Furthermore, the company said that revenue rose 3.2% to $1.14 billion. The firm also has plans to spin off its Macau properties, including the $2.3 billion Venetian Sands, in an initial public offering on the Hong Kong Stock Exchange later this month.
Technically speaking, LVS has soared more than 205% since the beginning of the year, compared to the S&P 500 Index's (SPX) advance of about 23%. What's more, during the past 60 days, LVS has bested the broad-market indicator by 16 percentage points. The equity is now in the process of rebounding from support at its 20-week moving average.
This trendline held as support heading into the company's earnings report, with bearish investors sending the equity sharply lower heading into the event. However, the stock came roaring back in the wake of the better-than-expected news, and LVS has since resumed its uptrend along support at its 10-week and 20-week trendlines. What's more, the shares appear to be duplicating a pattern similar to their performance from late May and early June. If this pattern continues, LVS should have no trouble overcoming its mid-September peak near $20.50 per share.
Despite this strong technical and fundamental performance, investors are betting on red. In the options pits, speculators are heavily bearish as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.60 ranks above 83% of all those taken during the past year. Additionally, LVS' 10-day International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) put/call volume ratio of 0.46 arrives higher than 82% of the readings taken in the prior year, meaning that options traders continue to snatch up puts at a rate rarely seen in the prior 52 weeks.
Digging into the open interest configuration for LVS, we find that the stock is trading comfortably above peak call accumulations. Currently, peak call open interest for the December series of options totals more than 32,000 contracts at the in-the-money 17.50 strike. However, traders should keep a closer eye on the 20 strike, as some 14,000 calls reside at this strike in the December series of options. On the put side, traders have piled into the deep out-of-the-money December 15 strike, a region that could provide structural support in the event of a pullback for LVS.
Elsewhere, short sellers are also bearishly aligned. Specifically, short interest jumped about 1% during the most recent reporting period so that more than 14.7% of the stock’s float was shorted. This wealth of pessimism holds the promise of additional sideline money for LVS, as these short sellers may be squeezed into covering their positions if the shares continue their run higher.
Another potential source of sideline money for LVS rests with brokerage firms on Wall Street. According to Zacks, seven of the 12 analysts following the shares rate them a "hold" or worse. This configuration is clearly bottom heavy in terms of pessimistic sentiment toward LVS shares. With the company offering up strong fundamentals in late October and the shares responding in kind, upgrades from these holdouts could add to the stock's uptrend.
Disclaimer: Joseph Hargett has no financial interest in any of the equities or products mentioned in this column.
