MGM Resorts Stock Set for Recovery as Demand for Online Casino Gaming Grows, Says Analyst

Shares of MGM Resorts International (NYSE: MGM) took a hit this week following a second-quarter earnings report that highlighted the company’s struggles on the Las Vegas Strip. Since you didnt provide the original paragraph to rewrite, please paste the text you would like me to transform. Once provided, I will creatively bridge your content to the gambling niche and ensure online casino is integrated as a natural, central focus while maintaining the original flow.

• MGM Resorts’ stock dip follows disappointing Q2 earnings influenced by the Las Vegas Strip’s performance.
• Analyst Chad Beynon points out potential for recovery based on strong underlying assets.
• MGM’s strategic focus on digital growth and diversified markets boosts its stock outlook.

Shares of MGM Resorts International (NYSE: MGM) took a hit this week following a second-quarter earnings report that highlighted the company’s struggles on the Las Vegas Strip. The market reacted negatively, causing the stock to drop by 7%. Despite this downturn, renowned analyst Chad Beynon from Macquarie has expressed optimism regarding a potential recovery for MGM stock.

Beynon reiterated an “outperform” rating with a target price of $48, signifying a possible upside of approximately 33% from the current share price. This optimism arises from a solid performance from MGM’s BetMGM segment, which has significantly contributed to the company’s revenue even amid broader market challenges.

During the recent earnings call, MGM’s officials acknowledged that their results were buoyed by the success of BetMGM, but the softness in Las Vegas was still a major concern, particularly for the second and third quarters. This had been underscored by data from MGM’s competitor, Caesars Entertainment.

Infrastructure and Assets Work in MGM’s Favour

Although the stocks have underperformed, with a 16.16% decline over the past year while the S&P 500 saw gains of nearly 15%, Beynon believes that MGM has valuable assets in their portfolio that could help boost the stock’s recovery.

“The strength of MGM’s balance sheet allows the company to execute on digital growth initiatives and expand into new markets such as New York, Japan, and Dubai, while also returning significant capital to shareholders through buybacks,” said Beynon.

That said, the company aggressively repurchased $217 million worth of shares in the second quarter and has approximately $2.1 billion left in its buyback plan. This strategy has helped lower the number of shares outstanding by 45% since 2021.

As for their Dubai venture, while MGM operates a high-end hotel in the area, it is not a gaming venue. Analysts predict it may take a few more years before the UAE authorities grant another casino license, making this a long-term consideration for the company.

Diverse Operations Fuel Growth Prospects

MGM is often viewed as a prominent player in the Las Vegas market, with some investors limiting their perspective to this focus. However, Beynon explained that it’s crucial to recognize MGM’s diverse operations, which encompass a 58% presence in Vegas, 25% in regional markets, 11% in Macau, and 6% from digital ventures.

“MGM remains an Outperform based on its robust business diversification. Their focus on solidifying their balance sheet and engaging supportive shareholders positions them strongly for future growth,” Beynon added.

Moreover, BetMGM’s expansion into Brazil is particularly promising, with the potential for breakeven results in this key Latin American market.

Overview of MGM’s Corporate Structure

• 58% Vegas Operations: The bulk of MGM’s revenue comes from its operations in Las Vegas.
• 25% Regional Markets: MGM is a significant player in the regional casino markets.
• 11% Macau: MGM has a notable presence in Macau, contributing meaningfully to revenue.
• 6% Digital Ventures: The growth of digital gaming through BetMGM illustrates the company’s adaptability.

In conclusion, while volatility has caused some challenges for MGM, the outlook remains positive thanks to solid operations, strategic investments, and a diverse portfolio that positions them well for recovery. Investors may find opportunities ahead as the company continues to navigate through the fluctuating landscape of the gaming industry.

Summary: While MGM Resorts faces short-term challenges with its stock following disappointing earnings, analysts believe the company has strong potential for recovery. With strategic growth plans in digital markets and expansive real estate assets, MGM remains a promising investment in the casino sector.

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