MGM Resorts International Returns to Normal Operations After Ransomware Attack
September 20, 2023 – Last updated on: September 20, 2023, 02:32h
MGM Resorts International (NYSE: MGM) has successfully restored operations at its US casino hotels following a recent ransomware attack. Analysts predict minimal financial impact for the company, thanks to its comprehensive cyber insurance policy.
JMP Securities analyst Jordan Bender suggests that MGM’s $200 million cyber insurance policy, which covers business interruptions and payments to hackers, will shield the company from significant costs related to the data breach.
“If the breach is fully covered within the policy, MGM will incur minimal costs along the way and see insurance premiums rise, but it would be a minor setback for a company generating $4.7 billion in cash flow this year,” wrote Bender.
A similar situation unfolded at Caesars Entertainment (NASDAQ: CZR), where a ransomware attack incurred costs of $15 million to $30 million. Fortunately, the payment was covered by Caesars’ cyber insurance policy, according to a Form 8-K filing with the Securities and Exchange Commission.
MGM May Face Short-Term Costs
Experts estimate that MGM could have lost up to $84 million in revenue due to the ongoing data breach. Additionally, the company is experiencing daily cash flow losses of $1 million and potential reputational damage. However, Bender believes that any cyber ransom paid by MGM would likely be covered by insurance.
While MGM has not officially confirmed the term “ransomware,” the company is required by the SEC to disclose any payments made to the hackers within four business days. Currently, MGM is focused on restoring normal operations, although some challenges may persist in the short term.
“We do not know the timeline of when operations will return to normal, but our checks indicate MGM is still experiencing day-to-day issues that could persist for a period of time,” added Bender.
MGM Share Price Expected to Recover
MGM’s ransomware attack has affected not only its guests and employees but also its investors. The company’s stock has declined by 6%, resulting in a loss of $850 million in market value. However, analysts project a rebound, with Bender maintaining an “outperform” rating and a $60 price target, implying a potential upside of over 50%.
“Historical precedent has shown that past hacks of credit cards and personal information in this industry have not significantly impacted long-term revenue. As a result, affected companies have seen a recovery in their stock prices,” concluded the analyst.