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Here's Why Investors Should Retain MGM Resorts (MGM) Stock
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MGM Resorts International (MGM - Free Report) will likely benefit from the solid Las Vegas market, sports betting expansion and the asset-light strategy. 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
Solid domestic operations bode well for the company. During the third quarter of 2022, the company benefited from strong leisure demand and better convention business in the Las Vegas market. During the quarter, net revenues at Las Vegas Strip Resorts were $ 2,301 million, up 66.6% year over year. The company benefited from increased business volume and travel activity on a year-over-year basis. The addition of The Cosmopolitan and Aria added to the upside. The company anticipates the momentum to continue owing to the strength in weekend ADR’s. During the quarter under review, net revenues from the company's regional operations totaled $973.9 million, up 5.3% from the prior-year quarter’s levels. The upside was primarily driven by increased business volume and travel activity. The company remains bullish on its domestic business outlook. Much optimism can be noted owing to attributes such as a rebound in convention business and increased international flight capacity.
Sports betting and iGaming continues to be major growth driver for the company. To this end, BetMGM continues to gain market share. Since its launch in 2018, the company has done extremely well and operates in 24 markets. It also announced a partnership with Carnival cruises to provide onboard ship betting and gaming under the BetMGM brand. During the third quarter, net revenues from BetMGM operations came in at $400 million, suggesting growth of 90% year over year. Also, the company stated that BetMGM’s revenues associated with operations surpassed a billion dollars through the first nine months of 2022. 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. The company is confident about the improved design and functionality of the BetMGM app launch (of a single wallet) and omnichannel growth prospects.
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 has simplified its structure by selling MGP (to VICI for $4.4 billion), The Mirage (to Hard Rock for $1.075 billion) and Gold Strike Tunica (to Cherokee Nation for $450 million). This apart, the company has initiated strategic changes with respect to taking over City Center operations. Also, it acquired the hotel operations of The Cosmopolitan of Las Vegas (from Blackstone for $1.625 billion). We believe that the transactions are likely to enhance and diversify the company’s offerings in the upcoming periods.
Image Source: Zacks Investment Research
In the past three months, shares of MGM Resorts have gained 25.6% compared with the industry’s growth of 20.3%.
Concerns
The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During third-quarter 2022, the company witnessed a dismal performance in the Macau region owing to subdued visitation. During the third quarter, MGM China's net revenues fell 69.7% year over year to $87.5 million. Notwithstanding the easing of certain COVID-19 protective measures by authorities worldwide, certain travel restrictions, quarantine measures, testing requirements and capacity limitations remain in effect at its Macau Operations. Although the company resumed operations in most of its properties, traffic is still below pre-pandemic levels. Given the uncertainties around the crisis, the company expects the pandemic to keep affecting operations for some time.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are World Wrestling Entertainment, Inc. , Hilton Grand Vacations Inc. (HGV - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) .
World Wrestling Entertainment currently sports a Zacks Rank #1. WWE has a trailing four-quarter earnings surprise of 25.2%, on average. The stock has increased 70.9% in the past year.
The Zacks Consensus Estimate for WWE’s 2023 sales and earnings per share (EPS) indicates a rise of 4.9% and 10.7%, respectively, from the year-ago period’s estimated levels.
Hilton Grand Vacations carries a Zacks Rank #2 (Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. Shares of HGV have declined 16.4% in the past year.
The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
Royal Caribbean currently carries a Zacks Rank #2. RCL has a trailing four-quarter earnings surprise of negative 1.8%, on average. Shares of RCL have declined 29.1% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 43.6% and 138.3%, respectively, from the year-ago levels.
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Here's Why Investors Should Retain MGM Resorts (MGM) Stock
MGM Resorts International (MGM - Free Report) will likely benefit from the solid Las Vegas market, sports betting expansion and the asset-light strategy. 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
Solid domestic operations bode well for the company. During the third quarter of 2022, the company benefited from strong leisure demand and better convention business in the Las Vegas market. During the quarter, net revenues at Las Vegas Strip Resorts were $ 2,301 million, up 66.6% year over year. The company benefited from increased business volume and travel activity on a year-over-year basis. The addition of The Cosmopolitan and Aria added to the upside. The company anticipates the momentum to continue owing to the strength in weekend ADR’s. During the quarter under review, net revenues from the company's regional operations totaled $973.9 million, up 5.3% from the prior-year quarter’s levels. The upside was primarily driven by increased business volume and travel activity. The company remains bullish on its domestic business outlook. Much optimism can be noted owing to attributes such as a rebound in convention business and increased international flight capacity.
Sports betting and iGaming continues to be major growth driver for the company. To this end, BetMGM continues to gain market share. Since its launch in 2018, the company has done extremely well and operates in 24 markets. It also announced a partnership with Carnival cruises to provide onboard ship betting and gaming under the BetMGM brand. During the third quarter, net revenues from BetMGM operations came in at $400 million, suggesting growth of 90% year over year. Also, the company stated that BetMGM’s revenues associated with operations surpassed a billion dollars through the first nine months of 2022. 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. The company is confident about the improved design and functionality of the BetMGM app launch (of a single wallet) and omnichannel growth prospects.
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 has simplified its structure by selling MGP (to VICI for $4.4 billion), The Mirage (to Hard Rock for $1.075 billion) and Gold Strike Tunica (to Cherokee Nation for $450 million). This apart, the company has initiated strategic changes with respect to taking over City Center operations. Also, it acquired the hotel operations of The Cosmopolitan of Las Vegas (from Blackstone for $1.625 billion). We believe that the transactions are likely to enhance and diversify the company’s offerings in the upcoming periods.
Image Source: Zacks Investment Research
In the past three months, shares of MGM Resorts have gained 25.6% compared with the industry’s growth of 20.3%.
Concerns
The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During third-quarter 2022, the company witnessed a dismal performance in the Macau region owing to subdued visitation. During the third quarter, MGM China's net revenues fell 69.7% year over year to $87.5 million. Notwithstanding the easing of certain COVID-19 protective measures by authorities worldwide, certain travel restrictions, quarantine measures, testing requirements and capacity limitations remain in effect at its Macau Operations. Although the company resumed operations in most of its properties, traffic is still below pre-pandemic levels. Given the uncertainties around the crisis, the company expects the pandemic to keep affecting operations for some time.
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 Zacks Consumer Discretionary sector are World Wrestling Entertainment, Inc. , Hilton Grand Vacations Inc. (HGV - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) .
World Wrestling Entertainment currently sports a Zacks Rank #1. WWE has a trailing four-quarter earnings surprise of 25.2%, on average. The stock has increased 70.9% in the past year.
The Zacks Consensus Estimate for WWE’s 2023 sales and earnings per share (EPS) indicates a rise of 4.9% and 10.7%, respectively, from the year-ago period’s estimated levels.
Hilton Grand Vacations carries a Zacks Rank #2 (Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. Shares of HGV have declined 16.4% in the past year.
The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
Royal Caribbean currently carries a Zacks Rank #2. RCL has a trailing four-quarter earnings surprise of negative 1.8%, on average. Shares of RCL have declined 29.1% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 43.6% and 138.3%, respectively, from the year-ago levels.