Caesars, MGM Earn Rave Reviews from JPMorgan on Las Vegas Recovery

It’s not 2019, but things are getting back to normal on the Las Vegas Strip, and that’s good news for the two largest operators there — Caesars Entertainment (NASDAQ:CZR) and MGM Resorts International (NYSE:MGM).

Some Wall Street analysts are increasingly bullish on the pair of gaming equities, with JPMorgan’s Joseph Greff joining that group today with positive commentary on the Bellagio and Flamingo operators. In the largest US casino center, weekend occupancy is strong and slated to remain that way through year-end — a positive for operators as they wait for convention business to return. Greff sees Las Vegas leading a travel resurgence.

Las Vegas will lead the group recovery, given its appeal as a blend and intersection of leisure and group [travel], the best of both worlds, in our view,” said the analyst.

He’s forecasting a round of second-quarter earnings per share beats from Sin City operators, citing raised guidance from those companies and bullishness around sports betting, as gamblers wait on the start of the 2021 football season.

Bullish on Caesars

Combined, Caesars and MGM run nearly 20 Strip casino-resorts, making the stocks logical picks for analysts and investors pointing to Las Vegas vibrancy.

Indeed, the shares are reflecting that scenario. Year-to-date, the Paris operator is higher by 49.23 percent, while the Mirage operator is up 38.18 percent. Those returns easily top those sported by companies with limited Las Vegas exposure and some large regional gaming operators.

“We value CZR’s core/traditional gaming business at ~$89 and its USSB/iGaming opportunity at $38, plus $1 per share credit for a sale of William Hill’s non-US operations,” said Greff.

An announcement on a buyer for William Hill’s international businesses is expected in the second half of the year, and that sale could bring in $2 billion or more for Caesars.

Enthusiasm for MGM

MGM is the largest Strip operator, and CEO Bill Hornbuckle recently spoke bullishly on Las Vegas activity, saying his company is seeing record-breaking slots play, adding that “We’re back with a vengeance.”

JPMorgan’s Greff lifts his MGM price target to $52 from $47, well above the Wall Street average of about $44. There’s potential for significantly more upside to that outlook.

“Assuming Las Vegas Strip revenues return to 2019 levels, there could be an incremental $6 of equity value per share not in our estimates,” said the analyst.