“Welcome back to the show,” wrote Truist Securities analyst Barry Jonas as he put a “Buy” rating on MGM Resorts International, which was trading at that moment at $37.08. Jonas raised his price target 25 percent, from $40 a share to $50.
The primary catalyst was the event calendar on the Las Vegas Strip, where MGM has its greatest volume of hotel rooms and casinos. Jonas enumerated next year’s Consumer Electronics Show, the triennial Con/Agg exposition, and Las Vegas’ first-ever Formula One race as major drivers of both non-gambling spending and room bookings: “Many days are already sold out.”
Allowing for some macroeconomic uncertainty, Jonas’s confidence was further bolstered by MGM’s room rates, which he believes shows strength into the first quarter of 2023. They are currently 42 percent higher overall, up 27 percent midweek and 66 percent on weekends. This trend continues into January and February, which are 38 percent and 31 percent higher than the comparable periods in already-strong 2022.
“During the Great Recession, Las Vegas experienced idiosyncratic conditions (new supply, negative White House messaging), which we don’t see today,” wrote Jonas, reflecting on the 2008 crisis. For the present, Jonas sees a “solid event calendar, return of the midweek traveler, and a more diversified market/attractions.
“Progress on Japan and any movement in [New York] could be positives,” added Jonas, possibly evincing impatience with the years-long process toward megaresorts in Nippon and the uncertainty surrounding granting Class III status to MGM Empire City Yonkers, which is currently operating without table games. On a positive note, Jonas observed that MGM China shares had rallied following the renewal of the company’s foothold in Macau.
He was also upbeat about BetMGM, which expects to turn a profit in 2023. This could, in Jonas’s estimation, generate “some value-recognition return,” in addition to a buyout of half-owner Entain. “We think MGM looks very inexpensive today,” he concluded.
