Published on: October 2, 2024, 05:40h.
Last updated on: October 2, 2024, 05:40h.
Shares of MGM Resorts International (NYSE: MGM) are down 11.32% year-to-date. This performance lags behind the S&P 500 and S&P Consumer Discretionary Select Sector index, which have posted gains of 20.8% and 12.3% respectively, where the gaming stock is categorized.
Despite a 9.18% increase in the last month, concerns about a slowdown in gross gaming revenue (GGR) in Nevada may be impacting investor sentiment towards MGM. Deutsche Bank analyst Carlo Santarelli highlighted this as well as a decline in baccarat winnings for Strip operators, with MGM being the largest among them.
The analyst lowered his price target on MGM to $52 from $57, however, this still implies a potential upside of 31.2% from the current closing price.
Santarelli mentioned that Las Vegas casino operators, including MGM, may not show strong GGR numbers for September due to a shorter month compared to 2023. He described the performance in September as flat, with the overall third quarter being challenging for US casino venues.
MGM Stock Potential
While MGM stock has not performed well, it could offer growth opportunities for patient investors given its strong balance sheet and growth prospects. The company has been actively buying back its own shares.
MGM is positioned for long-term growth, driven by organic and unique growth factors,” noted Santarelli.
Analysts also highlighted upcoming catalysts such as BetMGM, the development of an integrated resort in Osaka, and efforts to secure a gaming permit in New York. MGM’s plans to pursue a gaming license in the UAE and participate in the bidding for a casino permit in Thailand through its MGM China unit were also mentioned.
Potential Upside in Q4
Despite expectations of tepid third-quarter results for Strip operators, there is a possibility that investors are underestimating MGM’s potential upside for the current quarter. This could be a signal that the market expectations are low and MGM may surprise on the positive side.
“We believe that the negative sentiment surrounding Las Vegas is largely due to challenges faced months ago rather than a sudden decline in demand,” Santarelli remarked.
The Cosmopolitan, operators, have a strong financial position with $2.41 billion in cash and cash equivalents as of the second quarter.