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Here's Why Investors Should Retain MGM Resorts (MGM) Stock

MGM Resorts International MGM will likely benefit from the solid Las Vegas market, sports betting expansion and international expansion. However, subdued visitation in Macau remains a concern.

Let us discuss the factors that highlight why investors should retain the stock for now.

Factors Driving Growth

Shares of MGM Resorts have gained 41.6% in the past six months compared with the industry’s growth of 31.3%. The company is benefiting from strong brand recognition, pent-up consumer demand, high domestic casino spending and robust demand for sports betting. Also, it is gaining from increased visitation in the Las Vegas market.

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During the fourth quarter of 2022, net revenues at Las Vegas Strip Resorts were $2,297.3 million, up 27.2% year over year. The company benefited from increased business volume and travel activity on a year-over-year basis. Also, the addition of The Cosmopolitan and Aria added to the upside. During the quarter under review, net revenues from the company's regional operations totaled $991.5 million, up 10.2% from the prior-year quarter’s levels. The upside was primarily driven by an increase in business volume and travel activity. The company remains bullish on its domestic business outlook. Much optimism can be noted owing to attributes such as a rebound in convention business and increased international flight capacity.

Sports betting and iGaming continues to be a major growth driver for the company. To this end, BetMGM continues to gain market share. Since its launch in 2018, the company has done extremely well and operates in 24 markets. It also announced a partnership with Carnival cruises to provide onboard ship betting and gaming under the BetMGM brand. It has also integrated its MGM Rewards program with BetMGM to drive higher-value customers at lower acquisition costs through a robust omni-channel strategy. Given the unique and unparallel online and offline offerings, the company remains optimistic about long-term growth with revenue expectations of $1.8-$2 billion in 2023. The company expects to achieve positive EBITDA in the second half of 2023. The company is confident about the improved design and functionality of the BetMGM app launch (of a single wallet) and omnichannel growth prospects.

The company emphasizes on international expansion to drive growth. To this end, MGM Resorts made progress related to development plans in Japan and Dubai. It stated plans to expand its footprint in New York. However, it is subject to regulatory approvals. The company also emphasized on the completion of the LeoVegas acquisition. The initiative supports the company’s expansion in international markets and online gaming and paves a path to drive its omnichannel strategy and generate incremental earnings between brick-and-mortar and online channels.

Concerns

The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During fourth-quarter 2022, the company witnessed a dismal performance in the Macau region owing to subdued visitation. During the quarter, MGM China's net revenues fell 44.5% year over year to $174.7 million. The downside was mainly due to COVID-19-related property closures at MGM Cotai and travel and entry restrictions in Macau. Although the company resumed operations in most of its properties, traffic is still below pre-pandemic levels. Given the uncertainties revolving around the crisis, the implementation of future restrictions cannot be ruled out.

Zacks Rank & Key Picks

MGM Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Cedar Fair, L.P. FUN, Hilton Grand Vacations Inc. HGV and Crocs, Inc. CROX.

Cedar Fair sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 64.5%, on average. The stock has declined 17.5% in the past year.

The Zacks Consensus Estimate for FUN’s 2024 sales and EPS indicates a rise of 2% and 6.5%, respectively, from the year-ago period’s estimated levels.  

Hilton Grand Vacations currently sports a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 12.1%, on average. Shares of HGV have declined 16.5% in the past year.  

The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates a rise of 7.1% and 10.8%, respectively, from the year-ago period’s levels.

Crocs sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 21.8%, on average. Shares of Crocs have increased 63.7% in the past year.

The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates a rise of 12.5% and 2.5%, respectively, from the year-ago period’s levels.

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MGM Resorts International (MGM) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

Cedar Fair, L.P. (FUN) : Free Stock Analysis Report

Hilton Grand Vacations Inc. (HGV) : Free Stock Analysis Report

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