MGM Resorts Reports Declining Stock Amid Financial Challenges
MGM Resorts International (MGM), with a market capitalization of $8.6 billion, is a leading gaming and entertainment company operating casino resorts that provide gaming, hotel, convention, dining, entertainment, retail, and additional resort amenities. Based in Las Vegas, Nevada, MGM also offers online and digital games through its platforms.
Over the past year, MGM has underperformed compared to the broader market. Its shares have dropped 21.9%, while the S&P 500 Index ($SPX) has gained 8.6%. Year-to-date, MGM’s stock is down 8.4%, contrasting with the SPX’s decline of 4.3%.
In a narrower comparison, MGM’s performance appears slightly better when viewed alongside the VanEck Gaming ETF (BJK), which has seen a 6.4% decrease over the past 52 weeks and a 4.7% decline year-to-date.
MGM’s Q1 earnings report on April 30 revealed better-than-expected revenue of $4.3 billion and adjusted earnings per share (EPS) of $0.69. However, shares fell 1.9% after the announcement. Investor concerns may have stemmed from a 2.4% decline in year-over-year revenue and a nearly 6.8% drop in adjusted EPS. Weaker contributions from the Las Vegas Strip Resorts and MGM China segments contributed to these declines.
Despite these challenges, MGM succeeded in slightly reducing operating expenses compared to the same quarter last year. The company is making notable strides on its $200 million EBITDA enhancement program, expecting to achieve over $150 million of these improvements within the current fiscal year.
For the current fiscal year ending in December, analysts predict MGM’s EPS will decline by 21.6% year-over-year to $2.03. The company has had a mixed earnings surprise history, exceeding consensus estimates in three of the last four quarters, while falling short on one occasion.
Among the 18 analysts tracking MGM, the consensus rating is a “Strong Buy,” supported by 14 “Strong Buy” and four “Hold” ratings. This outlook is slightly less optimistic than two months ago when 15 analysts recommended a “Strong Buy.”
On May 5, Argus reaffirmed a “Buy” rating on MGM while lowering its price target to $40, indicating a potential upside of 26% from current levels. The mean price target stands at $45.74, suggesting a 44.1% premium to MGM’s current prices, while the highest target of $59 implies an ambitious upside potential of 85.9%.
On the date of publication, Neharika Jain did not hold (either directly or indirectly) positions in any securities mentioned in this article. All information and data are for informational purposes. For further details, please view the Barchart Disclosure Policy here.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
