MGM Resorts Analysts React To Q1 Earnings Beat, LeoVegas Acquisition, Macau Weakness

Zinger Key Points
  • A Morgan Stanley analyst said MGM's Las Vegas and U.S. Regional casino businesses exceeded his expectations.
  • A Bank of America analyst said MGM finished the first quarter on a high note in Vegas, and margins improved in Q1.

MGM Resorts International MGM shares traded lower by 3.5% on Tuesday after the company reported first-quarter earnings and revenue beats but a quarterly drop in Las Vegas Strip occupancy.

On Monday, MGM reported adjusted first-quarter EPS of 1 cent, exceeding analyst estimates of an 8-cent loss. Revenue for the quarter was $2.9 billion, slightly ahead of analyst expectations of $2.8 billion. Revenue was up 73.2% from a year ago.

MGM reported a Vegas Strip room occupancy rate of 78%, up significantly from 46% a year ago, but down from 86% in the fourth quarter. MGM also announced a $607 million buyout of online gaming company LeoVegas.

MGM China revenues remain depressed, coming in at $268 million, down 63% from pre-pandemic levels in 2019.

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Capital Return Story: Credit Suisse analyst Benjamin Chaiken said MGM remains one of his top stock picks, and the market doesn't fully appreciate its capital return story.

"MGM brought back $1bn of stock in the quarter, had $2.2bn remaining on the authorization as of quarter end and has purchased 6.2m shares in April," Chaiken wrote.

Wells Fargo analyst Daniel Politzer said MGM's quarter was impressive and leaves bears with little to criticize.

"Looking ahead, MGM expects 2Q22 occupancy to be in the low 90s, supported by strong leisure and group business (some rebookings from January), with further ADR/occupancy improvement over the course of 2022," Politzer wrote.

Better Opportunities Elsewhere: Morgan Stanley analyst Thomas Allen said MGM's Las Vegas and U.S. Regional casino businesses exceeded his expectations in the quarter, but Macau weakness continues to linger.

"We remain cautious on consumer spending trends heading into 2H22 and believe BetMGM could lose market share over the next 12-18 months so we see more attractive opportunities elsewhere in our Gaming coverage," Allen wrote.

Bank of America analyst Shaun Kelley said MGM finished the first quarter on a high note in Vegas.

"While Q1 LV Strip margins of 35.7% were below our 36.9% estimate, MGM noted on their call that margins improved throughout Q1, starting in the low 30s and ending in the low 40s in March," Kelley wrote.

Ratings And Price Targets:

  • Bank of America has a Neutral rating and $50 target.
  • Credit Suisse has an Outperform rating and $76 target.
  • Wells Fargo has an Overweight rating and $57 target.
  • Morgan Stanley has an Equal-Weight rating and $52 target.

Photo: Courtesy of newsroom.mgmresorts.com

Posted In: Bank of AmericaBenjamin ChaikenCredit SuisseDaniel PolitzerMorgan StanleyShaun KelleyThomas AllenWells FargoAnalyst ColorEarningsNewsPrice TargetAnalyst Ratings