MGM Resorts International executives told Wall Street analysts that they expect growth in Las Vegas despite tough comparisons to end 2024 and begin 2025.
The comments were repeated by Barry Jonas, an analyst with Truist Securities, which hosted MGM senior management for virtual investor meetings on Monday.
“MGM expects to see the fruit of non-gaming investment in Macau, while continuing to prioritize digital at home and abroad,” Jonas said. “We remain Buy-rated with a $54 price target. Tough comps in the near-term will make way for a better growth profile supporting MGM’s mid-teens free cash flow compounded annual growth algorithm.”
MGM is comfortable with the current setup for Las Vegas and is encouraged by the stability in demand, Jonas said. MGM saw success in November’s F1 race. Though demand was down year-over-year, it was in line with the commentary from other operators.
“Looking forward, management is seeing strong group bookings and transient business in the first quarter, with January’s Consumer Electronics Show tracking well to start the year,” Jonas said.
MGM faces tough comps in their upcoming earnings reports. In the fourth quarter of 2023, MGM recorde a $70 million baccarat hold, with 2024’s F1 facing a $30 million headwind. In the first quarter of 2024, MGM had the Vegas Super Bowl benefit of $60 million to $70 million, Jonas said.
“Looking into 2025, management is confident in the outlook as the high-end remains stable though driving pricing at lower properties remains challenging,” Jonas said. “On the top-line, MGM is confident it can grow average daily room rates in the second through fourth quarters of 2025 and recently increased resort fees at properties management felt were at or below market rates (+$5/room night).”
On the cost side, initiatives are underway, including improvements in headcount, labor costs, and restaurant pricing, Jonas said. In 2025, management expects to be at a run rate of the $200 million cost-savings target stated on the third-quarter earnings call. In addition, 800 MGM Grand rooms will be out of commission at any given time (about 3% of MGM’s Strip room base).
“Trump Bump or not?” Jonas asked. “At our conference, operators talked about a potentially healthier consumer post-election (overhang removed), with lower gas prices and generally better performance versus new competition.
MGM’s commentary was similar when it comes to confidence in its portfolio, Jonas said. Management called out strength at Beau Rivage in Mississippi and Springfield (Massachusetts) and noted an easy comp at Detroit, given last year’s strike, though Borgata remains challenged in a competitive Atlantic City market.
MGM noted that itself and other operators are making true on their 2022 concession-renewal promises in Macau, which require heavy investment in exchange for the ability to operate until 2033. This investment primarily in non-gaming for MGM has pressured margins of late, though it’s not expected to be dilutive to EBITDA.
“Overall, MGM is encouraged that it’s been able to maintain higher market share (14% to 16%) post-COVID, but does face new competition coming online in 2025 that may impact the business,” Jonas said.
Management continues to view digital as a core piece of the portfolio. BetMGM, its 50-50 joint venture with Entain, has grown significantly in some weeks. It has seen more than $2 billion-plus of gaming revenue, more than the entirety of MGM’s regional portfolio with runway ahead.
BetMGM has been investing heavily in technology and customer acquisition as it attempts to make up lost ground to DraftKings and FanDuel. MGM continues to expect it will drive positive EBITDA in 2026 and 2027 as investment efforts inflect, Jonas said.
“We note that for better transparency, management will be changing disclosures (beginning the first quarter of 2025), including more KPIs in the segment,” Jonas said. “In the meantime, MGM is pleased with its near-breakeven international LeoVegas business as it looks to scale globally.”
MGM continues to prioritize share repurchases and has reduced its share count by about 40% since 2021. Management continues to favor buybacks for reducing its capital base to boost per-share earnings and still believes shares are attractive on a valuation basis, Jonas said.
“On M&A, MGM sees itself having the core businesses in place and doesn’t see sizable additions in the near term, specifically noting its international digital buying spree was done.”