MGM Resorts Struggles Amid Market Rally: A Closer Look
Las Vegas-based MGM Resorts International (MGM) stands out as a major player in the hospitality and entertainment industry. With a market cap of $10.9 billion, the company offers guests memorable experiences through its renowned resorts, entertainment options, and gaming facilities.
Year of Disappointment for MGM Stocks
Over the past year, MGM Resorts has lagged behind the broader market. While the S&P 500 Index ($SPX) enjoyed a substantial 35.7% increase, MGM’s stock has gained marginally. In 2024, the situation worsened, with MGM stock down 15%, contrasting with the SPX’s YTD rise of 25.5%.
Comparative Underperformance in the Sector
Comparing MGM’s performance to the Consumer Discretionary Select Sector SPDR Fund (XLY) further highlights its struggles. The ETF surged 34.7% in the past year, while on a YTD basis, it rose 22.1%, contrasting sharply with MGM’s double-digit losses during the same period.
Disappointing Q3 Earnings Shake Investor Confidence
On October 30, MGM stock plummeted 11.7% following disappointing Q3 earnings. Both casino revenue and EBITDA fell short of what Wall Street expected. The adjusted earnings per share (EPS) dropped 15.6% year-over-year to $0.54, missing the consensus estimate of $0.66. Despite a 5.3% rise in total revenue to $4.18 billion, it was still below analyst forecasts of $4.22 billion. The adjusted EBITDA also disappointed, coming in at $548.2 million versus the expected $1.16 billion.
Future Earnings Expectations Dim
For the current fiscal year, which ends in December, analysts project that MGM Resorts’ EPS will decline 6.4% to $2.50 on a diluted basis. The company’s recent earning history shows mixed results, with three beats and one miss in the last four quarters.
Analysts Maintain Positive Outlook
Among 18 analysts covering MGM stock, a consensus rating of “Strong Buy” has emerged, with 15 analysts suggesting “Strong Buy” ratings and three recommending “Holds.” This positive sentiment has remained consistent over the past month.
Potential for Price Increase on the Horizon
Recently, Brandt Montour from Barclays reiterated a “Buy” rating on MGM, setting a price target of $50, which reflects a potential upside of 31.6% from the current valuation. The average price target stands at $50.84, signaling a 33.9% premium to MGM’s current prices, while the highest target of $56 indicates an upside of 47.4%.
On the date of publication, Rashmi Kumari 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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
