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MGM Resorts (MGM - Free Report) is a Zacks Rank #5 (Strong Sell) that owns and operates casino, hotel, and entertainment resorts in the United States and Macau. The company’s resort portfolio incorporates 30 unique hotel offerings, including some of the most familiar resort brands in the industry such as Bellagio, MGM Grand, Mandalay Bay and The Mirage.
About the Company
MGM is headquartered in Las Vegas, Nevada. The company was incorporated in 1986 and employs 52,000 people. MGM operates through three segments: Las Vegas Strip Resorts, Regional Operations, and MGM China.
As a percentage of revenue in 2021, the Las Vegas Strip was 49%, Regional Operations was 35% and MGM China was 12.5%. Management and other operations were 3.5%.
MGM is valued at $13.5 billion and has a Forward PE of 28. The company holds a Zacks Style Scores of “B” in Value, but “D” in Growth. The stock pays a small dividend of 0.03%.
Q3 Earnings
The company reported EPS on November 2nd, missing expectations by 732%. EPS came in at -$1.39 v the $0.22 expected. Revenues beat, coming it at $342B v the $326B expected. The loss was due to a $1.2B expense due to new Macau gaming laws.
Outside of that charge, the quarter was the company’s best in history. Las Vegas Strip RevPar was $210 vs $148 last year. Occupancy was up to 93% v the 82% last year. However, China Net revenues were down to $87M v the $289M last year.
While the company is optimistic about operations like BetMGM and strong domestic bookings into 2023, analyst are dropping their estimates.
Estimates
Over the last 60 days, current quarter estimates have fallen from $0.20 to a negative $1.31. While they have ticked higher for next quarter, the current year has been lowered as well. Over the last 60 days, we see a 70% drop for that time frame, falling from $4.51 to $1.29.
While these numbers have a lot to do with the Macau expense, next year is falling as well. Analyst have lowered their estimates from $0.70 to $0.24 over the last 60 days, but we have seen an uptick over the last 30 days from $0.04 to $0.24.
Technical Take
The stock is still trading above the 200-day moving average, but a break below that $35 level might cause some selling. While the stock down 20% on the year, it has traded sideways since August.
Investors should be cautious under $35 and seek value in the low $30s. A move above $39 and the bulls take back control of the stock.
In Summary
MGM has a great core business, but complications in Macau gaming laws are hitting their numbers. Additionally, China’s zero-COVID polices continue to hamper its business.
While the action is Vegas has been strong, margins are starting to look like an issue. If the customer starts to struggle, some of MGM’s resorts might as well.
For those interested in the gaming space, anoption in the sector might be Monarch Casino & Resort (MCRI - Free Report) . The stock is a Zacks Rank #1 (Strong Buy) that is trading higher on the year after a 12% EPS beat in October
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Bear of the Day: MGM Resorts (MGM)
MGM Resorts (MGM - Free Report) is a Zacks Rank #5 (Strong Sell) that owns and operates casino, hotel, and entertainment resorts in the United States and Macau. The company’s resort portfolio incorporates 30 unique hotel offerings, including some of the most familiar resort brands in the industry such as Bellagio, MGM Grand, Mandalay Bay and The Mirage.
About the Company
MGM is headquartered in Las Vegas, Nevada. The company was incorporated in 1986 and employs 52,000 people. MGM operates through three segments: Las Vegas Strip Resorts, Regional Operations, and MGM China.
As a percentage of revenue in 2021, the Las Vegas Strip was 49%, Regional Operations was 35% and MGM China was 12.5%. Management and other operations were 3.5%.
MGM is valued at $13.5 billion and has a Forward PE of 28. The company holds a Zacks Style Scores of “B” in Value, but “D” in Growth. The stock pays a small dividend of 0.03%.
Q3 Earnings
The company reported EPS on November 2nd, missing expectations by 732%. EPS came in at -$1.39 v the $0.22 expected. Revenues beat, coming it at $342B v the $326B expected. The loss was due to a $1.2B expense due to new Macau gaming laws.
Outside of that charge, the quarter was the company’s best in history. Las Vegas Strip RevPar was $210 vs $148 last year. Occupancy was up to 93% v the 82% last year. However, China Net revenues were down to $87M v the $289M last year.
While the company is optimistic about operations like BetMGM and strong domestic bookings into 2023, analyst are dropping their estimates.
Estimates
Over the last 60 days, current quarter estimates have fallen from $0.20 to a negative $1.31. While they have ticked higher for next quarter, the current year has been lowered as well. Over the last 60 days, we see a 70% drop for that time frame, falling from $4.51 to $1.29.
While these numbers have a lot to do with the Macau expense, next year is falling as well. Analyst have lowered their estimates from $0.70 to $0.24 over the last 60 days, but we have seen an uptick over the last 30 days from $0.04 to $0.24.
Technical Take
The stock is still trading above the 200-day moving average, but a break below that $35 level might cause some selling. While the stock down 20% on the year, it has traded sideways since August.
Investors should be cautious under $35 and seek value in the low $30s. A move above $39 and the bulls take back control of the stock.
In Summary
MGM has a great core business, but complications in Macau gaming laws are hitting their numbers. Additionally, China’s zero-COVID polices continue to hamper its business.
While the action is Vegas has been strong, margins are starting to look like an issue. If the customer starts to struggle, some of MGM’s resorts might as well.
For those interested in the gaming space, anoption in the sector might be Monarch Casino & Resort (MCRI - Free Report) . The stock is a Zacks Rank #1 (Strong Buy) that is trading higher on the year after a 12% EPS beat in October