MGM: Capital Deployment Flexibility From NY Exit Will Drive Recovery

The analyst price target for MGM Resorts International has declined from approximately $44.15 to $42.50. Analysts point to ongoing pressure in Las Vegas and regional markets, despite stable margins and some positive developments in Macau.

Analyst Commentary

Recent analyst reports on MGM Resorts International reflect a mix of optimism and caution, with changing valuations and updated expectations centered around the company's performance in both its domestic and international markets.

Bullish Takeaways

• Some bullish analysts have raised their price targets following improved industry trends and better EBITDA projections for 2025 and 2026. This outlook is primarily attributed to resilience in Macau operations.
• The decision to withdraw from the New York casino license process is viewed positively, as it frees capital for strategic deployment and eliminates significant future capital expenditures.
• Despite declining RevPAR trends in Las Vegas, some analyses suggest that the market has already factored in these negatives. This could support the stock's valuation as headwinds abate.
• There is a belief that improvement in Macau, along with increased exposure to higher-growth international markets, could drive upside in future quarters.

Bearish Takeaways

• Bearish analysts have lowered price targets due to persistent pressure in both Las Vegas and regional markets, with uncertainty around promotional activity and consumer trends.
• Recent performance metrics, especially in Las Vegas, indicate slowing growth. Underlying trends are described as soft and reflect sequential downticks throughout the quarter.
• Disappointing visitation and revenue statistics in Macau during key periods such as Golden Week have raised concerns about near-term growth potential despite some international recovery.
• Ongoing volatility in core domestic markets and modest improvement expectations for the coming months have tempered expectations for rapid execution or significant upside in the short term.

What's in the News

• Cboe Global announced plans to launch a new prediction markets offering, intentionally omitting sports-related products. MGM Resorts is among the notable publicly traded companies mentioned in this sector (Bloomberg).
• Macau is preparing for its fourth tropical storm in five weeks. This has contributed to weak trading performance for MGM Resorts and other gaming companies in New York markets (Macau Business).
• MGM Resorts recently completed the repurchase of 51,409,623 shares, representing 17.01% of shares outstanding, for $1.87 billion under its buyback program initially announced in November 2023 (Company Filing).
• MGM Resorts was dropped from the FTSE All-World Index (USD) (Company Filing).

Valuation Changes

• Consensus Analyst Price Target: Decreased from $44.15 to $42.50, reflecting a downward revision in fair value assessment.
• Discount Rate: Remained unchanged at 12.5%, indicating analyst risk assessment is stable.
• Revenue Growth: Lowered from 2.8% to 1.7%, suggesting expectations for slower top-line expansion.
• Net Profit Margin: Slightly increased from 3.78% to 3.94%, signaling a minor improvement in profitability projections.
• Future P/E Ratio: Increased from 19.4x to 20.3x, indicating a higher valuation relative to anticipated earnings.