Why MGM’s Stock Has Rallied 30% In The Past 3 Months

by Trefis Team
MGM Resorts International
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MGM Resorts International’s (NYSE: MGM) stock has rallied nearly 30% in the last three months and has outperformed the gaming industry at large. Las Vegas Sands and Wynn’s stocks have rallied as well, but to a much lesser extent during the same timeframe. So while there are some industry factors at play, MGM has benefited from specific tailwinds that helped it outperform its peers. MGM’s domestic expansion has resulted in tremendous growth for the company, and its recent opening in Maryland is also expected to contribute to its growth. Additionally, a strong rebound in the Macau gaming industry and the opening of MGM Cotai will generate revenue and EBITDA growth in the coming quarters. Lastly, the McGregor-Mayweather match should boost MGM’s revenues in the third quarter of this year.

Macau Rebound, MGM Cotai Opening Bring Optimism Among Investors

Many casino stocks have seen rallies due to the strong rebound in Macau, stable Las Vegas gaming industry growth and optimism surrounding the legalization of the casino business in Japan. As a result, most major casino stocks have outperformed the S&P 500 in recent months. MGM’s stock has increased by around 30% in the past three months, compared to 16% for Las Vegas Sands (NYSE: LVS), 22% for Wynn, and just 4% for the S&P 500.

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Macau gaming revenues have rebounded strongly in the last few months, growing by nearly 15%. MGM is scheduled to open its new casino in the Cotai strip, which is expected to attract significant interest and should boost MGM’s revenues and EBITDA from the region. It will also bolster MGM’s position in Macau, where LVS and Wynn have recently opened new casinos.

MGM’s Domestic Resorts Expansion Helped MGM Stock To Outperform Its Peers

In the first quarter of 2017, MGM opened its new casino MGM National Harbor in Maryland which had an outstanding first quarter run. This is another example of MGM’s expansion in domestic resorts. The diverse revenue streams help MGM generate stable revenue and profit growth.

Additionally, the McGregor-Mayweather boxing match, which is scheduled for August 26, is expected to drive substantial revenues for MGM and other casinos in Las Vegas. Not only will casinos benefit from increased traffic and betting activity, but the fight is scheduled to take place at T-Mobile Arena, which is partly owned by MGM. The event is estimated to generate as much as $1 billion in revenues, and MGM will likely be the largest beneficiary from this, due to its partial ownership of the venue as well as its significant presence in the Las Vegas Strip. As the hype around the fight builds, we expect it to generate significantly more revenues than the massive Mayweather-Pacquiao match in 2015.

For our model and valuation, please refer to our complete analysis of MGM Resorts International

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