MGM Resorts International (MGM - Free Report) is poised for growth on strong portfolio, solid prospects of the Macau business and focus on non-gaming activities. However, the coronavirus pandemic, dismal top and bottom-line performance, and increased competition remain concerns. Year-to-date, shares of the company have fallen 46.5%, compared with the industry’s decline of 26.5%.
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 key catalysts. 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.
The company derives a solid share of its revenues from Macau — the largest gaming destination in the world. It is undertaking initiatives to increase revenues and junket productivity in Macau, and anticipates a positive trend, buoyed by upgrades to main gaming floor products and marketing initiatives. Notably, revenues at MGM China improved 19% on a year-over-year basis in 2019. Despite the coronavirus pandemic, the company is confident about prospects in Macau and will continue to invest. The company announced that the market will bounce back quickly after the Visa scheme and other restrictions are lifted.
MGM Resorts utilizes various types of technology to maximize revenues and efficiency in operations. The company continues to adopt ways that drive bookings. The company has an M life Rewards program for customers at domestic resorts. M life provides access to rewards, privileges and members-only events.
After reopening Las Vegas properties earlier in June, MGM Resorts announced the reopening dates of several other resorts in the coming weeks. MGM Resorts will be reopening Luxor and The Shoppes in Mandalay Bay Place on Jun 25 followed with the reopening of ARIA along with the Four Seasons Las Vegas operator Mandalay Bay on Jul 1. The company is also expecting to reopen Excalibur on Jun 11.
MGM Resorts’ financial performance in 2020 is likely to be impacted by the outbreak of coronavirus. The company’s domestic operations are temporarily closed to contain the spread of the coronavirus. Although casinos in Macau properties are now open, the company is witnessing low visitation. The company announced that MGM China is bearing operating expenses of nearly $1.5 million per day.
In an effort to maintain sufficient liquidity, the company has cut dividend and decreased non-essential spending. Moreover, due to COVID-19 distress, MGM Resorts announced the termination of its previously announced modified Dutch auction tender offer. As a result of this termination, the company withdrew the purchase of $1,250,000,000 issued and outstanding shares of its common stock.
MGM Resorts, which shares space with Las Vegas Sands Corp. (LVS - Free Report) , Wynn Resorts, Limited (WYNN - Free Report) and Boyd Gaming Corporation (BYD - Free Report) , carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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