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MGM Resorts International’s (NYSE:MGM) core revenue growth was anemic even before the coronavirus outbreak, and a recovery has now become even more challenging, according to BofA Securities.
The MGM Resorts Analyst
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Shaun Kelley downgraded MGM Resorts International from Neutral to Underperform and raised the price target from $14 to $15.
The MGM Resorts Thesis
The Las Vegas market faces a long recovery ahead due to effects of the COVID-19 pandemic, with restrictions on air travel and low demand for conventions and large-scale entertainment, Kelley said in the Wednesday downgrade note. (See his track record here.)
Businesses on the Strip have low pricing power that is worsened by relatively high fixed costs and their overreliance on online travel agencies, the analyst said.
Las Vegas is highly dependent on long-distance travel, with 33% of visitors in 2019 coming from Eastern, Southern and Midwestern states and 20% from international markets, he said.
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Kelley expects leisure travel to recover faster than corporate travel.
MGM Resorts International has high exposure to business travel, estimated at up to 30%.
The company’s revenue growth had been meager between 2007 and 2019, with declines in both gaming and hotel revenue.
It could take MGM Resorts International four to six years to return to 2019 levels, according to BofA.
MGM Price Action
Shares of MGM Resorts International were down 3.88% at $15.85 at the time of publication.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.