MGM Resorts, Hilton, Hyatt, Las Vegas Sands rated Buy: Mizuho

Mizuho Securities has initiated coverage on travel and leisure sector names MGM Resorts (MGM), Las Vegas Sands (LVS), Hilton (HLT), and Hyatt Hotels (H), rating them each a Buy. Yahoo Finance Anchors Akiko Fujita and Josh Lipton discuss travel sector recovery.

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

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JOSH LIPTON: Time now for "Call of The Day," and Mizuho feeling bullish about the travel and leisure sector and issuing lots of coverage on hotels, casinos, and resorts. Analyst Ben Chaikin rating MGM Resorts Las Vegas Sands Hilton and Hyatt all with a buy, citing the ongoing travel recovery, particularly in the Asia-Pacific region and predicted growth in what he has dubbed business transient travel. So MGM was interesting as a call here.

Basically, he tells his clients, Akiko, OK, he's initiating with a buy, $61 target, a few different reasons, he says. One, he just thinks MGM is fundamentally misvalued, says-- he thinks they have several growth opportunities ahead. He talks about, for example Dubai hotel, mentions a Japan Casino development, and he says compelling free cash flow and stock buyback value creation path, thinks MGM could theoretically buy as much as 5 billion of stock over the next five years.

AKIKO FUJITA: Yeah, it's interesting to see how they look at MGM specifically being misvalued, saying that they manage the operations of a casino leases the underlying asset, paying rent to a landlord. But we view the lease payment as an operating expense and deduct it from the EBITDA generated to arrive at a true cash EBITDA. So they're saying that the market isn't necessarily looking at the right figures to value MGM where it should be.

The casino opportunity, certainly, an interesting one, that Japan casino. It feels like has been in development for some time. But that's something that analysts have been flagging for a while since they did a move forward on that several years ago. Marriott, another hotel that Mizuho has initiated coverage on with a neutral rating, price target at $263 a share, specifically Mizuho saying that near-term, a net unit growth estimates of potential upside, but they are concerned that it's that longer-term trends are decelerating.

JOSH LIPTON: MGM, by the way, he does mention some risks for his clients to think about before you pile in, mentions competitive pressure. There's obviously operational risk, legislative risk, not to mention geopolitical risks. But that's not his base case, obviously. He's build up on it.