On the basis of the Sept. 10 cyberattack on MGM Resorts International’s U.S. casinos, J.P. Morgan analyst Joseph Greff adjusted his cash-flow estimates for the company. He also shaved $2 off his price target for MGM stock, down to $61 per share. It was trading at $35.99 per share at the time.
Greff’s new third-quarter estimates of cash flow for MGM are $280 million from its regional casinos and $673 million from the Las Vegas Strip, where MGM controls the largest single bloc of hotel rooms and employees. He cited “a small but lingering impact related to the cyberattack and bump our [second-half] and 2024 corporate expenses to reflect higher IT costs and cyber insurance premia.”
At the same time, Greff raised his cash-flow projections for MGM’s Macau casinos to $239 million, a 14 percent increase. This was predicated on “slightly better” gross gambling revenue than expected and the presumption that MGM’s Macanese casinos replicate their second-quarter performance in the third quarter.
Since the second-quarter earnings report, MGM shares have shed 30 percent of their value. “Investor sentiment toward MGM (and, frankly, most of gaming, both U.S. and Macau-centric) is extremely negative, and we see MGM shares offering contrarian investors tremendous value,” Greff reported.
Minimizing the Sept. 10 impact as a one-time event and pointing to “solid” Las Vegas business, Greff argued, “The stock more than reflects and prices in risks from a slowing U.S. consumer, labor disruption, and China macro/geopolitical concerns.” He called the stock’s valuation — 6.5 times cash flow — “undemanding.”
Greff concluded, “We continue to see value in MGM shares and believe that MGM possesses an attractive combination of … LV Strip exposure and a market that should benefit from continued midweek group and convention business, as well as a strong event calendar,” through the Super Bowl early next year.
