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The Las Vegas economy appears to be strengthening, and MGM Resorts International (NYSE: MGM) is poised to benefit. Morgan Stanley’s Thomas Allen resumed coverage of the company with an Overweight rating and a price target of $29. He commented that the upside was “hard to ignore.”
Strong Las Vegas Fundamentals
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Visitation to Las Vegas has improved 3.5 percent year-to-date. MGM recently reported 8 percent growth in 1Q RevPAR. “MGM's cross-selling ability and positioning across the price spectrum allows it to benefit from multiple trends,” analyst Thomas Allen wrote. He added that this had resulted in the Bellagio generating the highest EBITDA in Vegas in 1Q16, for the first time since 2Q12.
Profit Growth Plan
MGM's $300m profit growth plan is tracking ahead of schedule and could be significant tailwind, Allen said. The company has already recorded $65m of savings in 2H15, higher than management’s target of $30-$45m. For 1Q16, MGM recorded $59m in savings.
The analyst mentioned that management's target of $200m in cost savings appears easily achievable, representing a mere 4 percent decline in domestic costs, as compared to precedent plans that had reduced expenses by an average of ~9 percent.
“Precedents suggest a clear pattern of stock outperformance where announced plans have driven a visible acceleration in profit growth,” Allen commented.
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.