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MGM Resorts International Remains Positive Despite Disappointing Results


MGM Resorts International, a prominent casino company, recently reported underwhelming results for its regional operations. However, one Stifel analyst still maintains a positive outlook on the stock.

On Wednesday, MGM was the worst-performing stock in the S&P 500, even as the index saw a modest increase of 0.3%. MGM’s shares dropped by 7.8% to $42.127, marking their largest percentage decrease since November 2022 according to Dow Jones Market Data.

In contrast, other casino stocks experienced gains. Las Vegas Sands was up by 1.1%, Wynn Resorts saw a 0.6% increase, and Caesars Entertainment gained 0.1%.

MGM announced its fourth-quarter earnings of $1.06 per share after the stock market closed on Tuesday, surpassing Wall Street expectations of 71 cents. Additionally, the company’s revenue for the quarter amounted to $4.38 billion, exceeding the consensus estimate of $4.14 billion.

A significant contributor to the positive earnings was the remarkable performance of MGM’s Macau division. Macau revenue for the quarter soared by 462% compared to the previous year, with Chief Executive William Hornbuckle highlighting the region’s flourishing tourism industry.

However, despite the encouraging results from Macau, Stifel analyst Steven Wieczynski noted that investor concerns regarding margin outcomes in both the regional and Las Vegas segments caused the negative market reaction.

Overall, MGM Resorts International’s stock may have faced a setback due to disappointing regional operations results, but the company still garners support from analysts who believe in its long-term potential.

Regional Operations

The regional operations segment, which includes areas such as Michigan, Mississippi, and New Jersey, experienced a 12% decrease in revenue, amounting to $873 million. The decline can be attributed in part to a union strike in Detroit. Additionally, the adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs margins saw a drop from 32.2% last year to 26.7% in the current quarter.

Las Vegas Revenue

On the other hand, Las Vegas revenue witnessed a 3% increase, totaling $2.4 billion. This growth was driven by local events like Formula 1. However, the adjusted property Ebitdar margins declined from 38.2% in the previous year to 36.5%.

Analysis and Outlook

Despite the decline in margins, analysts remain optimistic about MGM’s core business performance. Lead indicators suggest that demand levels are expected to remain strong for the foreseeable future. As a result, Eric Wieczynski rates the stock as a Buy with a price target of $57.

Furthermore, Truist Securities analyst Barry Jonas predicts promising results for MGM’s Las Vegas operations, mainly due to an upcoming event pipeline in 2024, which includes significant events like the recently hosted Super Bowl. Jonas maintains his Buy rating and sets a price target of $58.

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