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MGM Resorts (MGM) Declines 31% in a Year: Is the Worst Over?
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Shares of MGM Resorts International (MGM - Free Report) have declined 31.4% in the past year compared with the industry’s fall of 50.1%. However, the stock has displayed some resilience, increasing 1.2% in the past three months. Let’s delve deeper and find out why investors should hold on to the stock.
Factors Likely to Drive Growth
MGM Resorts, one of the leading companies in the gaming and lodging industry, is well poised to grow on high brand awareness. The company’s superior business model, extensive non-gaming revenue opportunities, high-quality assets and attractive property locations are the primary growth drivers. In the past few years, the company has taken various initiatives to align every recognized brand into one global entertainment brand.
This Zacks Rank #3 (Hold) company is also benefiting from strong leisure demand. During the second quarter of 2022, the company benefited from strong leisure demand and better convention business in the Las Vegas market. During the quarter, net revenues from Las Vegas Strip Resorts were $2,137.2 million, up 112.7% year over year. Increased business volume and travel activity (on a year-over-year basis), coupled with the inclusion of The Cosmopolitan and Aria, added to the upside.
The company continues to focus on sports betting and iGaming to drive growth. 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. Given the positive momentum in markets coupled with its unique and unparalleled online and offline offerings, the company remains optimistic about long-term growth with revenue expectations of more than $1.3 billion in 2022. The company expects to achieve a positive EBITDA in 2023. To drive growth, the company continues to invest in additional markets.
On the other hand, the company rebranded its customer loyalty program from M life to MGM Rewards. The updated program emphasizes key opportunities like targeting high-value non-gaming customers in addition to high-volume gaming customers as well as 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.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 89.1% and 113%, respectively, from the year-ago period’s reported levels.
Playa Hotels & Resorts carries a Zacks Rank #2. PLYA has a trailing four-quarter negative earnings surprise of 8.8%, on average. The stock has declined 25.9% in the past year.
The Zacks Consensus Estimate for PLYA’s current financial year EPS indicates growth of 206.3% from the year-ago period’s reported levels.
InterContinental Hotels carries a Zacks Rank #2. IHG has a long-term earnings growth of 32.7%. The stock has declined 25.6% in the past year.
The Zacks Consensus Estimate for IHG’s current financial year sales and EPS indicates growth of 21.7% and 88.4%, respectively, from the year-ago period’s reported levels.
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MGM Resorts (MGM) Declines 31% in a Year: Is the Worst Over?
Shares of MGM Resorts International (MGM - Free Report) have declined 31.4% in the past year compared with the industry’s fall of 50.1%. However, the stock has displayed some resilience, increasing 1.2% in the past three months. Let’s delve deeper and find out why investors should hold on to the stock.
Factors Likely to Drive Growth
MGM Resorts, one of the leading companies in the gaming and lodging industry, is well poised to grow on high brand awareness. The company’s superior business model, extensive non-gaming revenue opportunities, high-quality assets and attractive property locations are the primary growth drivers. In the past few years, the company has taken various initiatives to align every recognized brand into one global entertainment brand.
This Zacks Rank #3 (Hold) company is also benefiting from strong leisure demand. During the second quarter of 2022, the company benefited from strong leisure demand and better convention business in the Las Vegas market. During the quarter, net revenues from Las Vegas Strip Resorts were $2,137.2 million, up 112.7% year over year. Increased business volume and travel activity (on a year-over-year basis), coupled with the inclusion of The Cosmopolitan and Aria, added to the upside.
The company continues to focus on sports betting and iGaming to drive growth. 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. Given the positive momentum in markets coupled with its unique and unparalleled online and offline offerings, the company remains optimistic about long-term growth with revenue expectations of more than $1.3 billion in 2022. The company expects to achieve a positive EBITDA in 2023. To drive growth, the company continues to invest in additional markets.
On the other hand, the company rebranded its customer loyalty program from M life to MGM Rewards. The updated program emphasizes key opportunities like targeting high-value non-gaming customers in addition to high-volume gaming customers as well as 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.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hyatt Hotels Corporation (H - Free Report) , Playa Hotels & Resorts N.V. (PLYA - Free Report) and InterContinental Hotels Group PLC (IHG - Free Report) .
Hyatt carries a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 798.8%, on average. The stock has increased 1.6% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 89.1% and 113%, respectively, from the year-ago period’s reported levels.
Playa Hotels & Resorts carries a Zacks Rank #2. PLYA has a trailing four-quarter negative earnings surprise of 8.8%, on average. The stock has declined 25.9% in the past year.
The Zacks Consensus Estimate for PLYA’s current financial year EPS indicates growth of 206.3% from the year-ago period’s reported levels.
InterContinental Hotels carries a Zacks Rank #2. IHG has a long-term earnings growth of 32.7%. The stock has declined 25.6% in the past year.
The Zacks Consensus Estimate for IHG’s current financial year sales and EPS indicates growth of 21.7% and 88.4%, respectively, from the year-ago period’s reported levels.