MGM Resorts Stock Has Recipe for Rebound, Says Analyst

• MGM stock faltered this week following Q2 earnings report, in which Las Vegas was primary drag.
• Analyst says shares could rebound because operator has “several lions in the den.”

Due in part to a second-quarter earnings report that confirmed weakness on the Las Vegas Strip, shares of MGM Resorts International (NYSE: MGM) are off 7% this week, but at least one analyst believes the casino behemoth has the ingredients in place to fuel a rebound.

In a note to clients today, Macquarie analyst Chad Beynon reiterated an “outperform” rating and a $48 price target on MGM stock, implying potential upside of about 33% from where the shares reside at this writing. Earlier this week, the Luxor operator delivered second-quarter results that beat estimates, but that was largely the byproduct of strength in the BetMGM segment.

Beynon noted that while MGM’s second-quarter earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) declined more than expected, that situation merits closer examination because much of it is attributable to “renovation disruption” at the MGM Grand on the Las Vegas Strip.

Plum Assets Could Stoke MGM Resorts Stock

MGM Resorts stock has been a dud, slumping 16.16% over the past year while the S&P 500 gained nearly 15% over the same span. However, a resurgence could be facilitated by a portfolio and pipeline rich with enviable assets.

With balance-sheet strength, MGM is positioned to execute on digital growth, New York, Japan, and Dubai, while also returning significant capital to shareholders through buybacks,” observes Beynon.

In the second quarter, MGM repurchased $217 million of its own shares. As of June 30, the operator had $2.1 billion remaining on previously authorized buyback plans, confirming it has plenty of firepower with which to continue reducing its shares outstanding count. The company has pared that number by 45% since 2021.

Regarding Dubai, that’s a longer-ranging issue for MGM because while the company has a high-end hotel there, it’s not a gaming venue and it could be several years before regulators in the United Arab Emirates (UAE) approve another casino license.

Digital Key to MGM Resorts Stock Outlook

Due to MGM’s status as the largest operator on the Las Vegas Strip, some investors often view the stock as a Sin City play, but that point of views ignores the operator’s compelling diversification, including growing BetMGM contributions.

“MGM remains an Outperform on strong business diversification (58% Vegas, 25% Regional, 11% Macau, 6% Digital),” adds Beynon. “We regard its balance-sheet strength, supportive shareholders and goal to be a global entertainment leader as key positives.”

The analyst points out that BetMGM is boosting investments in Brazil and it’s close to notching breakeven results in Latin America’s largest economy.