During the COVID-19 pandemic, MGM Resorts International (MGM: NYSE) achieved one of the most dramatic turnarounds of any travel and leisure business.
With its showrooms, bars and restaurants closed as the pandemic curtailed travel, the gaming and resort operator fell to 11.77 on May 14, 2020. But with growing optimism for the “reopening” , the operator of casino hotels like Bellagio, MGM Grand and Excalibur in Las Vegas, plus an even bigger activity in China, closed at 41.20 on April 21, a gain of more than 300% compared to its hollow.
Investors are betting on a solid future for MGM in its properties in the United States and China and in online gaming. As the MGM website says, “You no longer need to visit a bookmaker to place a bet.” BetMGM, which launched in West Virginia last year on April 21, 2021, announced that it expects to reach $ 1 billion in net operating income in 2022 due to “strong momentum.”
BetMGM is jointly owned by MGM Resorts International (MGM) and Entain, (motto: “For the sake of entertainment”). In the United States, BetMGM is available in Colorado, Indiana, Iowa, Michigan, New Jersey, Pennsylvania, Tennessee, Virginia, and West Virginia, as well as Nevada. Jamie Foxx is a spokesperson.
BetMGM said it has a 23% market share in the three-month period ending in February. “BetMGM has demonstrated strong momentum, building a leading position in iGaming and is on its way to becoming the number two in sports betting and iGaming in the United States,” said Adam Greenblatt, Managing Director of BetMGM.
So, with players returning to MGM properties (or their home country), are investors likely to continue to triple their investment? A recent review of consensus and analyst trends shows that there is reason to wave the flag of caution.
Of 16 analysts listed by UKTN, only two had MGM as a strong buy. Three called it a buy. Ten analysts, over 60%, called MGM maintenance, and one gave it a rating of “underperformance”. Analysts’ consensus for a price target for MGM was 39.66, below its April 21 close of 41.20.
MGM is a top notch “reopening” title. The question is whether the company’s profits will match the expectation that tourists and business delegates will return to Las Vegas in droves. Will MGM continue its strong growth or has its share price taken the lead?
When MGM announced its latest results in February, he noted that “the company’s liquidity in its domestic operations remains strong at $ 5.6 billion. But the other numbers weren’t so positive.
MGM said, “Consolidated net revenues decreased 53% from the previous year quarter to $ 1.5 billion, due to lower business volume and travel activity due to pandemic, hotel and other closures at some establishments, travel restrictions at our Macau resorts and ongoing. operating restrictions. ”
MGM recorded a consolidated operating loss of $ 364 million, compared to operating income of $ 3.0 billion in the prior year quarter. The prior year quarter included a $ 2.7 billion gain on MGM’s sale of the Bellagio to Blackstone; MGM continues to operate the station as part of an “asset light” strategy. On a per share basis, MGM lost $ 0.92 in the quarter, compared to earnings per share of $ 3.91 in the prior year quarter.
But the stock market is a forward looking mechanism. As a reopening piece, investors appear as bullish on MGM’s outlook as they do on other travel sectors such as airlines and hotels.
And like airlines and hotels, MGM also offers a popular loyalty program, M life Rewards. It allows members to redeem earned points for time spent at the gaming table on hotel stays, discounted meals and show tickets.
With the US travel market focused on domestic leisure travelers, MGM properties in Massachusetts, Detroit, Mississippi, Maryland, New Jersey and Nevada could become destinations this summer. The company has historically focused on entertainment, dining and shopping as well as gambling. In Las Vegas, the company operates thirteen resorts catering to many different portfolios, from budget (Excalibur, Luxor) to mid-range (Mirage Grand, Park MGM) to luxury (Bellagio, Vdara.)
A question of reopening has just been answered: Cirque du Soleil, which declared bankruptcy in 2020, is resurfacing. The company is initially relaunching four of its iconic shows after being shut down for more than a year due to the pandemic. Two of the opening shows, “O” at the Bellagio and the Cirque Blue Man Group affiliate show at the Luxor Hotel and Casino, will be presented at the MGM properties.
A recent Bank of America analyst report said pent-up demand and the return of older players are expected to lead to a rise for casinos in the coming months. But will this be true for business and convention travel? In 2020 and 2021, Las Vegas suffered as giant conventions like the 170,000-person Consumer Electronics Show were canceled or “gone virtual.”
MGM has its own exhibition center in Mandalay Bay, which at 2.1 million gross square feet is the fifth largest convention center in the United States. While the governor of Nevada has promised a full reopening by June, the question of how far congresses and business travel will return is an open question.
Yet MGM has overcome many challenges. Ahead of the pandemic, the company struck an $ 800 million financial deal to help the hundreds of survivors and victims of the tragic Las Vegas Strip shooting in October 2017.
As tourism demand returns, vaccinations increase and quarantine barriers fall, MGM Resorts should take advantage.