MGM Resorts International still has a fan in one Stifel analyst, who remains positive on the stock after the casino company posted disappointing results for its regional operations.
MGM was the worst performer Wednesday in the S&P 500, which was up 0.3%. Shares were dropping 7.8% to $42.127 and were on pace for their largest percentage decrease since November 2022, according to Dow Jones Market Data.
Other casino stocks traded higher. Las Vegas Sands was rising 1.1%, Wynn Resorts was up 0.6%, and Caesars Entertainment gained 0.1%.
After the stock market closed on Tuesday, MGM reported fourth-quarter earnings of $1.06 a share, beating Wall Street expectations of 71 cents. Revenue for the quarter was $4.38 billion, above the consensus call for $4.14 billion.
Macau revenue of $983 million for the quarter jumped 462% from the prior year. Chief Executive William Hornbuckle said on the earnings call that Macau is doing “amazingly well” as tourism in the region increases.
While the top- and bottom-line beats benefited from the strong Macau results, Stifel analyst Steven Wieczynski wrote that the negative stock reaction was due to investor concerns over the company’s margin results in both its regional and Las Vegas segments.
Regional operations — the segment that includes areas like Michigan, Mississippi, and New Jersey — saw revenue decrease by 12% to $873 million, partially due to a union strike in Detroit. Adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs margins of 26.7% in the quarter dropped from last year’s 32.2%. Las Vegas revenue increased 3% to $2.4 billion, with help from local events like Formula 1. But adjusted property Ebitdar margins of 36.5% declined from the prior year’s 38.2%.
“Instead of focusing on margins, we would instead be focusing on how strong MGM’s core business continues to perform, and lead indicators suggest demand levels shouldn’t slow anytime soon,” Wieczynski said. He rates the stock as a Buy with a $57 price target.
Truist Securities analyst Barry Jonas sees tailwinds for the company’s Las Vegas results following a 2024 event pipeline, including the Super Bowl that just took place there. He maintains his Buy rating and $58 price target.
