MGM Stock Has Makings of a Winner, Says Analyst

As highlighted by a year-to-date loss of 3.11%, MGM Resorts International (NYSE: MGM) stock has spent much of 2024 dithering, but a 7.66% jump over the past month indicates the shares have some momentum. Some analysts concur.

MGM Water
Bellagio Las Vegas. An analyst is bullish on MGM stock. (Image: Vegas Food & Fun)

In a new report to clients, BTIG analyst Clark Lampen initiated coverage of the casino giant with a “buy” rating and a $52 price target, which implies upside of 20.14% from today’s closing price of $43.28. The analyst believes it’s possible the stock could build on recent momentum with the assistance of upward earnings and revenue estimates.

Those catalysts would be sourced via ongoing strength on the Las Vegas Strip and in Macau as well as capital return efforts, including the possibility of a dividend from the MGM China unit. That entity is 56%-owned by the Las Vegas-based parent and runs two integrated resorts in Macau.

Likewise, MGM remains one of the most dedicated buyers of its own shares of any company in the US. Since 2021, the operator has pared its shares outstanding tally by 36% due to multiple share buyback plans.

Vegas, Digital Opps Could Boost MGM Stock

BTIG’s Lampen sounded a constructive tone on MGM’s digital operations and its Las Vegas Strip footprint. MGM is the largest operator in the US casino center.

With Vegas implied at ~8x ’24 earnings before interest, taxes, depreciation, and amortization (EBITDA) within our sum-of-the-parts (or ~5x when lease liabilities are capitalized at 8x cash rent, rather than full BS liability), the current fundamental story doesn’t seem appropriately discounted, and we’d expect the multiple to expand as Vegas concerns fade and numbers move higher,” observed the analyst.

Lampen also noted MGM’s digital business is an unfolding story that may not be getting the credit it deserves among market participants. Last week, the company said its LeoVegas will acquire the US operations of Tipico Sportsbook in a move aimed at bolstering its tech stack.

The analyst called MGM’s digital operations a marquee driver of “growing delta between BTIG’s estimates” and consensus forecasts stretching out over several years.

Asset Sales Possible

In addition to the possibility of a dividend MGM China dividend and the parent company’s domestic shareholder return efforts, Lampen added it’s possible that the stock could be sparked by the sale(s) of regional casinos.

In March, rumors surfaced that MGM was mulling the sale of MGM Northfield Park, a racino near Cleveland, and its eponymous casino hotel in Springfield, Mass. The operator has yet to publicly confirm it’s considering divesting those or any of its regional casinos nor did Lampen mention specific properties the operator could sell.

While it’s possible MGM is evaluating sales of some of its regional casinos, the current interest rate environment is hard on prospective buyers that need financing, meaning the most desirable suitors are those that can execute transactions with minimal need for additional capital. That diminishes the pool of would-be buyers for regional casinos.

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