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Here's Why Investors Should Retain MGM Resorts (MGM) Stock
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MGM Resorts International (MGM - Free Report) is likely to benefit from pent-up consumer demand, sports betting expansion and a loyalty program. Also, emphasis on asset-light strategy bodes well. However, a decline in traffic from pre-pandemic levels is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Factors Driving Growth
Shares of MGM Resorts have gained 4% in the past year against the industry’s 43.3% plunge. The company is benefiting from pent-up consumer demand, high domestic casino spending and robust demand for sports betting. Also, it is benefiting from increased visitation in the Las Vegas market.
Image Source: Zacks Investment Research
In Las Vegas, the company’s revenues are back to normal, owing to leisure and domestic casino customers. In 2021, net revenues at Las Vegas Strip Resorts were $4.7 billion compared with $2.2 billion in 2020. The upside was primarily driven by the easing of operational and capacity restrictions and an increase in travel due to the easing of cross-border restrictions over time. During the fourth quarter of 2021, Strip hotel occupancy increased sequentially to 86% from 82% in third-quarter 2021. Going forward, the company anticipates the momentum to continue owing to strength in weekend ADR’s.
Sports betting and iGaming continue to drive growth following the legalization of sports betting outside Nevada. To this end, BetMGM continues to gain market share. Ever since its launch in 2018, the company has done extremely well and is now operating in 23 markets. Total contributions from BetMGM in 2021 came in at $850 million, thereby growing nearly five times from 2020 levels. Given the positive momentum in markets coupled with its unique and unparalleled online and offline offerings, the company is optimistic about long-term growth, with revenue expectations of more than $1.3 billion in 2022. MGM expects to achieve positive EBITDA in 2023. To drive growth, it continues to invest in additional markets. MGM Resorts and Entain anticipate investing approximately $450 million in 2022. BetMGM has a long-term growth target of 20-25% in U.S. sports betting and iGaming. Currently, the company is on track to achieve its target.
The company continues to focus on the loyalty program to drive growth. On Feb 1, 2022, the company rebranded its customer loyalty program from M life to MGM Rewards. The updated program emphasizes key opportunities, like targeting high-value nongaming customers and high-volume gaming customers as well as incentivizing cross-property patronage and tier progression with more benefits. The launch of MGM Rewards also comes with a new streamlined app that makes it simple for members to review their tier status and benefits. In 2021, approximately 42% of new database sign-ups came from BetMGM. Given the unparallel collection of resorts coupled with premier partnerships, the company anticipates attracting and retaining more high-value gaming, digital gaming, and nongaming customers in the upcoming periods.
MGM Resorts is focusing on an asset-light strategy. The company continues to emphasize on monetizing its real estate assets and bolstering its domestic cash position. To this end, the company simplified its structure by selling MGP (to VICI) and The Mirage (to Hard Rock for $1.075 billion). The company has initiated strategic changes with respect to taking over City Center operations. Also, MGM entered into a definitive agreement with Blackstone to acquire the hotel operations of The Cosmopolitan of Las Vegas for $1.625 billion. The transaction is subject to regulatory approvals and is likely to close in the first half of 2022. We believe that the deals will simplify its corporate structure with additional liquidity, helping the company transition into a premier gaming entertainment company.
Concerns
The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During fourth-quarter 2021, the company’s operations were affected by a spike in omicron cases as well as COVID-related restrictions. Although the company resumed operations in most of its properties, traffic is still below pre-pandemic levels. Given the uncertainties related to the crisis, chances of operational restrictions (imposed by governmental authorities), reimposing stay at home orders and travel restrictions cannot be ruled out. A resurgence in coronavirus cases might hurt the company’s performance.
Funko sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have declined 18.2% in the past year.
The Zacks Consensus Estimate for Funko’s current financial-year sales and EPS (earnings per share) suggests growth of 22.6% and 26.8%, respectively, from the year-ago period’s levels.
Bluegreen Vacations sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 425.1%, on average. Shares of the company have surged 37.3% in the past year.
The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s levels.
Marriott carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 17.6% in the past year.
The Zacks Consensus Estimate for Marriott’s current financial-year sales and EPS indicates growth of 40.3% and 73%, respectively, from the year-ago period’s levels.
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Here's Why Investors Should Retain MGM Resorts (MGM) Stock
MGM Resorts International (MGM - Free Report) is likely to benefit from pent-up consumer demand, sports betting expansion and a loyalty program. Also, emphasis on asset-light strategy bodes well. However, a decline in traffic from pre-pandemic levels is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Factors Driving Growth
Shares of MGM Resorts have gained 4% in the past year against the industry’s 43.3% plunge. The company is benefiting from pent-up consumer demand, high domestic casino spending and robust demand for sports betting. Also, it is benefiting from increased visitation in the Las Vegas market.
Image Source: Zacks Investment Research
In Las Vegas, the company’s revenues are back to normal, owing to leisure and domestic casino customers. In 2021, net revenues at Las Vegas Strip Resorts were $4.7 billion compared with $2.2 billion in 2020. The upside was primarily driven by the easing of operational and capacity restrictions and an increase in travel due to the easing of cross-border restrictions over time. During the fourth quarter of 2021, Strip hotel occupancy increased sequentially to 86% from 82% in third-quarter 2021. Going forward, the company anticipates the momentum to continue owing to strength in weekend ADR’s.
Sports betting and iGaming continue to drive growth following the legalization of sports betting outside Nevada. To this end, BetMGM continues to gain market share. Ever since its launch in 2018, the company has done extremely well and is now operating in 23 markets. Total contributions from BetMGM in 2021 came in at $850 million, thereby growing nearly five times from 2020 levels. Given the positive momentum in markets coupled with its unique and unparalleled online and offline offerings, the company is optimistic about long-term growth, with revenue expectations of more than $1.3 billion in 2022. MGM expects to achieve positive EBITDA in 2023. To drive growth, it continues to invest in additional markets. MGM Resorts and Entain anticipate investing approximately $450 million in 2022. BetMGM has a long-term growth target of 20-25% in U.S. sports betting and iGaming. Currently, the company is on track to achieve its target.
The company continues to focus on the loyalty program to drive growth. On Feb 1, 2022, the company rebranded its customer loyalty program from M life to MGM Rewards. The updated program emphasizes key opportunities, like targeting high-value nongaming customers and high-volume gaming customers as well as incentivizing cross-property patronage and tier progression with more benefits. The launch of MGM Rewards also comes with a new streamlined app that makes it simple for members to review their tier status and benefits. In 2021, approximately 42% of new database sign-ups came from BetMGM. Given the unparallel collection of resorts coupled with premier partnerships, the company anticipates attracting and retaining more high-value gaming, digital gaming, and nongaming customers in the upcoming periods.
MGM Resorts is focusing on an asset-light strategy. The company continues to emphasize on monetizing its real estate assets and bolstering its domestic cash position. To this end, the company simplified its structure by selling MGP (to VICI) and The Mirage (to Hard Rock for $1.075 billion). The company has initiated strategic changes with respect to taking over City Center operations. Also, MGM entered into a definitive agreement with Blackstone to acquire the hotel operations of The Cosmopolitan of Las Vegas for $1.625 billion. The transaction is subject to regulatory approvals and is likely to close in the first half of 2022. We believe that the deals will simplify its corporate structure with additional liquidity, helping the company transition into a premier gaming entertainment company.
Concerns
The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During fourth-quarter 2021, the company’s operations were affected by a spike in omicron cases as well as COVID-related restrictions. Although the company resumed operations in most of its properties, traffic is still below pre-pandemic levels. Given the uncertainties related to the crisis, chances of operational restrictions (imposed by governmental authorities), reimposing stay at home orders and travel restrictions cannot be ruled out. A resurgence in coronavirus cases might hurt the company’s performance.
Zacks Rank & Key Picks
MGM Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Consumer Discretionary sector include Funko, Inc. (FNKO - Free Report) , Bluegreen Vacations Holding Corporation and Marriott International, Inc. (MAR - Free Report) .
Funko sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have declined 18.2% in the past year.
The Zacks Consensus Estimate for Funko’s current financial-year sales and EPS (earnings per share) suggests growth of 22.6% and 26.8%, respectively, from the year-ago period’s levels.
Bluegreen Vacations sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 425.1%, on average. Shares of the company have surged 37.3% in the past year.
The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s levels.
Marriott carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 17.6% in the past year.
The Zacks Consensus Estimate for Marriott’s current financial-year sales and EPS indicates growth of 40.3% and 73%, respectively, from the year-ago period’s levels.