MGM Upgraded, Penn Downgraded, Wynn Top Idea in Stifel 2023 Gaming Coverage

The early innings of 2023 are bringing about a fresh round of commentary from sell-side analysts, with Stifel’s Steven Wieczynski chiming in on a variety of familiar names.

In a new note to clients, Wieczynski unveils constructive comments on Las Vegas Strip and Macau operators, while expressing reservations about regional casino companies. As such, he upgraded MGM Resorts International (NYSE: MGM) to “buy” from “hold,” while maintaining a “buy” rating on Wynn Resorts (NASDAQ: WYNN) and boosting his price target on that name. At least three analysts just this week lifted price objectives on the Encore operator.

We are big believers in the Macau/China reopening trade continuing along as Macau slowly returns to normal,” wrote Wieczynski. “We believe the LV Strip will continue to flourish aided by a strong event calendar and the return of group/convention traffic.”

Macau is Wynn’s biggest market, while MGM is the largest operator on the Strip and also controls about 56% of MGM China.

Enthusiasm for MGM, Wynn

With the help of China dropping its zero-COVID policy and relaxing Macau travel protocols, Wynn started 2023 with a bang, surging 14.05% over the past week.

The aforementioned price target hikes are also helping the shares. Wieczynski boosted his 12-month forecast on Wynn to $115 from $109. He also upped his price estimates on Las Vegas Sands (NYSE: LVS), which is the largest Macau operator, and Monarch Casino & Resort (NASDAQ: MCRI).

As we move into 2023, we believe Macau-centric stocks could present investors with an interesting way to play the China reopening story,” added the analyst. “While we have had several head fakes over the last year in which it seemed China was going to abandon their zero-COVID policies, each head fake turned out to be a false alarm. Now, however, there seem to be clear signs coming out of Beijing that COVID limitations/restrictions are indeed going to be eliminated for good.”

Regarding MGM, the Bellagio operator’s shares disappointed last year when considering the impressive monthly gross gaming revenue (GGR) data delivered by Nevada casino companies. The stock is higher by 8.39% over the past week. Wieczynski’s new price target on that name is $46, implying significant upside from the Thursday close at $35.15.

“Our upgrade is pretty simple. At this point, we believe the LV Strip momentum should easily continue through 2023 and into 2024, and we see more value with Macau/LV Strip operators versus pure play regional gaming operators,” said the analyst. “LV Strip leisure demand remains solid and we have seen no evidence that customer spending is softening. The LV Strip event calendar is strong in 2023, with multiple marquee events. In addition, we expect the midweek group and convention business should return to pre-pandemic (run rate) levels before the end of the year.”

Tepid on Penn Entertainment

Citing potential weakness for regional casino operators, Wieczynski is less constructive on Penn Entertainment (NASDAQ: PENN) — the largest company in that space.

“Our fear is that consensus estimates are too aggressive at this point, and we would expect there might need to be some downward revisions moving forward. Looking at 2023 for PENN, you have to remember that they are going to see a substantial amount of new supply,” concluded the Stifel analyst.

He trimmed his price target on Penn to $35 from $45.