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MGM Resorts Stock Gains on Probable Starboard Value Stake

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Per media report, activist hedge fund Starboard Value has built a position in the MGM Resorts International (MGM - Free Report) . Following the news, the company’s shares gained 1.4% on Jan 10.

People familiar with the matter said that in the last few months Starboard Value has built a small position in the company. However, the exact value of the position has been kept under wraps. It is to be seen what type of changes the activist hedge fund is looking for.

MGM 2020 Plan to Drive Growth

Recently, the company announced the MGM 2020 plan, which will not only focus on cost-saving initiatives but also on improving efficiencies. The company also implemented a similar plan in 2015, which was very successful. MGM Resorts has shown impressive growth since the announcement of its Profit Growth Plan in 2015.

The company expects annualized adjusted EBITDA of $300 million, which consists of $200 million by the end of 2020 and another $100 million by the end of 2021. MGM Resorts stated that $200 million of annualized cost savings will be driven by labor savings, sourcing and revenue optimization. MGM Resorts’ CEO James Murren said that labor-cost savings have not been taken by shareholders’ pressure.

 

The company has informed that it is generating significant free cash flow. It aims to invest in technological advancements, which will boost revenues and increase market share. Technological advancements will enhance guest experience through pricing and digital, as well as loyalty capabilities.

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 resulted in a disciplined business model, with a unified view of strategy.

This Zacks Rank #3 (Hold) company has gained 6.3% in the past three months, as against the industry’s 1.3% decline.

Key Picks

A few better-ranked stocks in the same industry include Wynn Resorts (WYNN - Free Report) , Churchill Downs (CHDN - Free Report) and Melco Resorts (MLCO - Free Report) . While Wynn Resorts currently sports a Zacks Rank #1 (Strong Buy), Churchill Downs and Melco Resorts carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Churchill Down and Melco Resorts’ earnings for 2019 are expected to increase 26.7% and 3.1%, respectively. Wynn Resorts has an impressive long-term earnings growth rate of 20%.

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