Opinions
Jim Lebenthal
MGM Resorts International
MGM-N
WEAK BUY
Jul 03, 2024
$43.280
Stock price when the opinion was issued
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Allan Tong’s Discover Picks MGM made waves before last Christmas when it sold its Mirage Hotel & Casino to Hard Rock for $1.08 billion as part of its “asset-lite” strategy, which includes devoting more capital to its online sport betting operations. Therefore, companies like MGM can operate sports betting but can offset those high costs through their other operations, like casinos and hotels. Since the deal, MGM shares have gone sideways, trading between $40-46, though off 52-week highs. Sure, Covid did the casinos no favours, though MGM endured it relatively well by suffering only a $1.5 billion cash burn. (In 2019, MGM boasts $12.96 billion in net revenues, $1.8 billion in operating cash flow and a 14% cash flow margin.) Read Battle of the stocks: 2 Sports Gambling Stocks for our full analysis.
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Allan Tong’s Discover Picks If you still like gambling stocks, then consider MGM which was has only 12% exposure to Macau. It reported Q3 a month ago and admittedly it was mixed. Earnings missed but revenues beat. MGM’s engines of growth were its casinos as well as BetMGM and sports betting. MGM China’s revenues fell 69.7% YOY, mainly due to Covid, however Vegas revenues soared 66.6% YOY, helped by the opening of the Aria and Cosmopolitan resort-casinos. Quarterly revenue grew nearly 30% YOY. Read Between Safety and Risk: 3 Safe and Gambling Stocks for our full analysis.
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Vegas tourism is white hot. Revenue per room was up 11% in May YOY, convention attendance up 2%, and visitors up 5%. MGM has over half its business from Vegas. But he doesn't like MGM's regional business and those patrons are struggling from higher inflation and interest rates. He Likes MGM, but prefers Wynne because it has more Vegas exposure. But Vegas' boom isn't pushing up Vegas stocks, which is frustrating. Frankly, the market is getting it wrong. When Wynne reports, their strong Macau business will shine.