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Here's Why Investors Should Retain MGM Resorts (MGM) Stock
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MGM Resorts International (MGM - Free Report) will likely benefit from sports betting expansion, a loyalty program and the asset-light strategy. However, a decline in traffic from pre-pandemic levels is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Factors Driving Growth
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 is now operating in 23 markets. Total contributions from BetMGM in first-quarter 2022 came in at $125 million compared with $75 million reported in the prior-year quarter. Given the positive momentum in markets coupled with its unique and unparalleled online and offline offerings, the company is optimistic about long-term growth, with revenue expectations of more than $1.3 billion in 2022. MGM expects to achieve positive EBITDA in 2023. To drive growth, it continues to invest in additional markets. MGM Resorts and Entain anticipate investing approximately $450 million in 2022. BetMGM has a long-term growth target of 20-25% in U.S. sports betting and iGaming. Currently, the company is on track to achieve its target.
The company continues to focus on the loyalty program to drive growth. On Feb 1, 2022, the company rebranded its customer loyalty program from M life to MGM Rewards. The updated program emphasizes key opportunities, like targeting high-value nongaming customers and high-volume gaming customers and incentivizing cross-property patronage and tier progression with more benefits. The launch of MGM Rewards also comes with a new streamlined app that makes it simple for members to review their tier status and benefits. In first-quarter 2022, approximately 57% of our new database sign-ups came from BetMGM. Given the unparallel collection of resorts coupled with premier partnerships, the company anticipates attracting and retaining more high-value gaming, digital gaming, and nongaming customers in the upcoming periods.
Although the company's operations in Las Vegas were affected by the decline in business volume and travel due to the spread of the Omicron variant at the beginning of the first quarter, sequential improvements have been witnessed since then. The company continues to witness solid consumer demand and high domestic casino spending in the region. Also, positive momentum in international leisure trends added to the upside. During first-quarter 2022, net revenues at Las Vegas Strip Resorts were $1.7 billion, up 205% year over year. It benefited from the addition of Aria. Going forward, the company anticipates the momentum to continue owing to the strength in weekend ADR’s.
MGM Resorts is focusing on an asset-light strategy. The company continues to emphasize on monetizing its real estate assets and bolstering its domestic cash position. To this end, the company simplified its structure by selling MGP (to VICI) and The Mirage (to Hard Rock for $1.075 billion). Also, MGM entered into a definitive agreement with Blackstone to acquire the hotel operations of The Cosmopolitan of Las Vegas for $1.625 billion. The company made solid progress in this regard and anticipates closing the deal in second-quarter 2022. However, it is subject to regulatory approvals. We believe that the deals will simplify its corporate structure with additional liquidity, helping the company transition into a premier gaming entertainment company.
In the past year, shares of MGM Resorts have declined 18.7% compared with the industry’s fall of 53.4%.
Image Source: Zacks Investment Research
Concerns
The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During first-quarter 2022, the company witnessed a dismal performance in the Macau region owing to subdued visitation. During the first quarter, MGM China's net revenues fell 9% year over year to $268 million. Also, the figure fell 63% from 2019 levels. Notwithstanding the easing of certain COVID-19 protective measures by authorities worldwide, certain travel restrictions, quarantine measures, testing requirements and capacity limitations remain in effect at its Macau Operations. 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 company expects the pandemic to keep affecting operations for some time.
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 31.5% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Funko sports a Zacks Rank #1. FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 22.1% in the past year.
The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 26.8% and 31%, respectively, from the year-ago period’s reported levels.
Civeo carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have increased 80% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and EPS suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.
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Here's Why Investors Should Retain MGM Resorts (MGM) Stock
MGM Resorts International (MGM - Free Report) will likely benefit from sports betting expansion, a loyalty program and the asset-light strategy. However, a decline in traffic from pre-pandemic levels is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Factors Driving Growth
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 is now operating in 23 markets. Total contributions from BetMGM in first-quarter 2022 came in at $125 million compared with $75 million reported in the prior-year quarter. Given the positive momentum in markets coupled with its unique and unparalleled online and offline offerings, the company is optimistic about long-term growth, with revenue expectations of more than $1.3 billion in 2022. MGM expects to achieve positive EBITDA in 2023. To drive growth, it continues to invest in additional markets. MGM Resorts and Entain anticipate investing approximately $450 million in 2022. BetMGM has a long-term growth target of 20-25% in U.S. sports betting and iGaming. Currently, the company is on track to achieve its target.
The company continues to focus on the loyalty program to drive growth. On Feb 1, 2022, the company rebranded its customer loyalty program from M life to MGM Rewards. The updated program emphasizes key opportunities, like targeting high-value nongaming customers and high-volume gaming customers and incentivizing cross-property patronage and tier progression with more benefits. The launch of MGM Rewards also comes with a new streamlined app that makes it simple for members to review their tier status and benefits. In first-quarter 2022, approximately 57% of our new database sign-ups came from BetMGM. Given the unparallel collection of resorts coupled with premier partnerships, the company anticipates attracting and retaining more high-value gaming, digital gaming, and nongaming customers in the upcoming periods.
Although the company's operations in Las Vegas were affected by the decline in business volume and travel due to the spread of the Omicron variant at the beginning of the first quarter, sequential improvements have been witnessed since then. The company continues to witness solid consumer demand and high domestic casino spending in the region. Also, positive momentum in international leisure trends added to the upside. During first-quarter 2022, net revenues at Las Vegas Strip Resorts were $1.7 billion, up 205% year over year. It benefited from the addition of Aria. Going forward, the company anticipates the momentum to continue owing to the strength in weekend ADR’s.
MGM Resorts is focusing on an asset-light strategy. The company continues to emphasize on monetizing its real estate assets and bolstering its domestic cash position. To this end, the company simplified its structure by selling MGP (to VICI) and The Mirage (to Hard Rock for $1.075 billion). Also, MGM entered into a definitive agreement with Blackstone to acquire the hotel operations of The Cosmopolitan of Las Vegas for $1.625 billion. The company made solid progress in this regard and anticipates closing the deal in second-quarter 2022. However, it is subject to regulatory approvals. We believe that the deals will simplify its corporate structure with additional liquidity, helping the company transition into a premier gaming entertainment company.
In the past year, shares of MGM Resorts have declined 18.7% compared with the industry’s fall of 53.4%.
Image Source: Zacks Investment Research
Concerns
The Gaming industry is currently grappling with the coronavirus pandemic and MGM Resorts isn’t immune to the trend. During first-quarter 2022, the company witnessed a dismal performance in the Macau region owing to subdued visitation. During the first quarter, MGM China's net revenues fell 9% year over year to $268 million. Also, the figure fell 63% from 2019 levels. Notwithstanding the easing of certain COVID-19 protective measures by authorities worldwide, certain travel restrictions, quarantine measures, testing requirements and capacity limitations remain in effect at its Macau Operations. 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 company expects the pandemic to keep affecting operations for some time.
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 Bluegreen Vacations Holding Corporation , Funko, Inc. (FNKO - Free Report) and Civeo Corporation (CVEO - Free Report) .
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 31.5% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Funko sports a Zacks Rank #1. FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 22.1% in the past year.
The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 26.8% and 31%, respectively, from the year-ago period’s reported levels.
Civeo carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have increased 80% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and EPS suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.