J.P. Morgan has lowered its Las Vegas Strip earnings estimate for MGM Resorts International but projects a slightly higher stock price in part for an upside in regional properties and its new branding agreement with MGM China.
“We update our estimates to reflect fourth quarter 2025 operating trends that are tracking slightly worse in Las Vegas, slightly better in regionals, and in line in Macau,” said analyst Daniel Politzer. “Separately, we refine our model to account for MGM’s new branding agreement with MGM China, which we view as a positive for MGM/parent in the form of higher attributable free cash flow, albeit at the expense of the 56% owned MGM China.”
Politizer said they’re saying neutral on MGM stock and “fall squarely in the middle of a nascent bull/bear debate.” The price target has increased $1 to $39.
While he said the valuation has been undemanding at a 15% implied free-cash-flow yield, it’s unclear if Strip EBITDAR estimates have reset low enough to entice investors. He said they forecast 2026 Strip EBITDAR to be flat year-over-year.
J.P. Morgan has lowered its fourth-quarter Strip EBITDAR estimate to $702 million, 2.5% below its prior estimate of $720 million.
“The $702 million equates to an 8% year-over-year EBITDAR decline, less bad than the third quarter’s 12% decline (net of adjustments), but another downward revision nonetheless,” Politzer said.
For October and November, Strip visitation is tracking down 5% year-over-year and revenue per room is tracking down 6% year-over-year, while gaming demand remains stable, with gaming revenue tracking up 3.5% year-over-year, Politizer said.
“Looking ahead, we also lower our first quarter of 2026 EBITDAR to $758m (7% below our prior estimate and about 3% below Street’s $782 million), which on a year-over-year basis implies the first-quarter EBITDAR could improve to flat with help from the Con/Agg show,” Politzer said.
The new branding agreement is positive for parent MGM, but negative for subsidiary MGM China, Polizer said. Effective Jan. 1, MGM’s royalty rate will step up from 1.75% to 3.50% of MGM China revenues and MGM’s share of the fees will be 67% versus its prior 50%, with the agreement extending through at least 2032, Politzer said.
Mechanics of the new agreement are nuanced on the 2026 forecast revenue of $4.7 billion. MGM’s consolidated EBITDAR will be about $60 million lower than under the prior agreement, but the attributable free cash flow will be $60 million higher than under the prior agreement, Politzer said.
MGM’s stock has been resilient, Politzer said. Since the end of November, MGM is up “a seemingly unremarkable 1%,” but when considering that MGM China has declined 26% over this same time period, MGM’s resilience has been impressive, he added.
MGM’s 56% stake in MGM China accounted for 46% of its total market cap at the end of November, but the value of this stake has declined from $4.5 billion to $3.3 billion today, equating to 34% of MGM’s market cap, Politzer said. With MGM’s overall market cap +1% during this period, this equates to MGM’s core equity value, excluding MGM China, increasing +24% over this time period, he said.
