/MGM%20Resorts%20International%20lion%20by-%20atosan%20via%20iStock.jpg)
Based in Las Vegas, Nevada, MGM Resorts International (MGM) owns and operates hotels and casinos, state-of-the-art meetings and conference spaces, and live and theatrical entertainment experiences. Valued at $10.69 billion by market cap, the company’s resorts portfolio encompasses 31 unique hotel and gaming destinations globally, including some of the most familiar resort brands such as Bellagio, MGM Grand, Mandalay Bay, and The Mirage.
Shares of this global gaming and entertainment company have underperformed the broader market considerably over the past year. MGM has declined 22.5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 16.1%. In 2024 alone, MGM stock is down 22%, while the SPX is up 9% on a YTD basis.
Narrowing the focus, MGM’s underperformance is also apparent compared to the S&P 500 Cons Disc Sector SPDR (XLY). The exchange-traded fund has declined marginally over the past year. Moreover, the ETF’s 4.4% loss on a YTD basis compares to the stock’s double-digit loss over the same time frame.
On Aug. 1, MGM shares fell more than 14% after the company reported its Q2 results. Its adjusted EPS rose 45.8% year over year to $0.86, surpassing the consensus estimates of $0.66. The company’s revenue stood at $4.33 billion, beating Wall Street expectations of $4.18 billion. In its earnings call, MGM said that due to softness in Formula 1, room rates in the fourth quarter will not exceed $1,000 per night like last year. As compared to the previous year, Formula 1 is seeing fewer advanced pre-bookings.
Moreover, investors were concerned about BetMGM, which is not performing as previously hoped, and more capital might be needed in that business and MGM’s own international online gambling business.
For the current fiscal year, ending in December, analysts expect MGM’s EPS to grow 12.7% to $3.01 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
Among the 17 analysts covering MGM stock, the consensus rating is a “Strong Buy.” That’s based on 15 “Strong Buy” ratings and two “Holds.”
This configuration is slightly more bullish than three months ago, with 14 suggesting a “Strong Buy.”
Recently, Wells Fargo analyst Daniel Politzer maintained a “Buy” rating on MGM stock with a price target of $53, implying a potential upside of 55.6% from current levels.
The mean price target of $56.50 represents a 65.8% premium to MGM’s current price levels. The Street-high price target of $65 suggests an ambitious upside potential of 90.8%.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
