The pandemic blues weighs on the stock of MGM Resorts

[Updated 2021/08/03]

After surpassing pre-Covid levels in June, shares of MGM Resorts (NYSE: MGM) saw a slight correction due to continued weakness in Macau, resurgence of infections in the US and a broader downtrend in sportsbook stocks. The long-term goal of the company is to expand its presence in Asia and achieve a significant market share of the domestic sports betting and online gaming industry. While the strategic direction is likely to lead to revenue and earnings growth, the near-term drop in discretionary spending is straining the company’s finances. Trefis highlights quarterly trends in revenue, earnings, share price and expectations for Q2 2021 in an interactive dashboard analysis, Overview of the benefits of MGM Resorts.

How did MGM Resorts perform during the first quarter?

MGM’s revenues in the first quarter of 2021 were down 27% from the first quarter of 2020 and 48% from the first quarter of 2019 as business activity remained weak due to the pandemic-related restraint measures . Declining table games and room occupancy rates improved sequentially at the company’s regional and Macau properties as demand for air travel increased. The company reported a net loss of $ 331 million and spent $ 87 million on operating cash in the last quarter. In a similar macroeconomic environment, Q2 revenues are expected to contract 38% from Q2 2019 (before the pandemic).

[Updated 2021/04/28] – Time to book profits in MGM Resorts shares?

Actions of MGM Resorts (NYSE: MGM) gained 13% over the past month thanks to the growing market presence of its sports betting and iGaming app, BetMGM. Interestingly, the stocks of its competitors, Penn National Gaming and Draft Kings have trended downward. Is It Time To Record Profits In MGM Stocks? Comparing MGM’s $ 9 billion market cap gain with a Penn National’s $ 6 billion increase since August 2020 (investor optimism lifted sportsbook stocks in Q3 2020), Trefis thinks that the MGM share has reached its short-term potential. Recently, MGM Resorts pointed out in its investor presentation that it is targeting a 20-25% share of the US online sports betting and gaming industry, similar to other sports betting apps including FanDuel. , Draft Kings and Penn’s Barstool. Thus, the strong competitive rivalry of conventional casinos and online betting applications should weigh on MGM in the long run. Our interactive dashboard highlights historical trends in revenue, earnings and stock price for MGM Resorts, Buy or fear MGM Resorts shares?

[Updated 2021/03/25]

After hitting highs of $ 64 in October 2020, Draft Kings Stock (NASDAQ

NDAQ
: DKNG) only gained 12% despite increasing its US iGaming market projection from $ 21 billion in March 2020 to $ 40 billion according to a recent investor presentation. The huge jump in the total addressable market has propelled DKNG’s revenue expectations by 55% with a targeted market share of 15-20%. Interesting way, MGM Resorts (NYSE: MGM) also envisions a 15% share of the US sports betting industry, as highlighted in the recent release of the results. Draft Kings and BetMGM are among the most popular sports betting apps in Pennsylvania, New Jersey, and Nevada – with states accounting for nearly 75% of total sports betting. Comparing Draft Kings’ massive $ 28 billion market cap with just a $ 4 billion increase in MGM’s value from pre-Covid levels, Trefis thinks DKNG stock looks expensive.

If you want to own MGM Resorts shares, The Trefis machine learning engine for MGM Resorts tests the chances of increase over a longer or shorter period. You can test the probability of a rise or fall over different time intervals such as a quarter, a month, or even a single day!

[Updated 2021/01/08]

Recently, MGM Resorts (NYSE: MGM) made an offer to acquire Entain plc at a price of 1,383 pence per share for a value of just over $ 11 in order to expand its presence in the global sports betting industry. and online games. MGM is aiming for a 15-20% share of the US sports betting and iGaming market, according to its Q3 2020 earnings report ^[1]. And the acquisition movement is aligned with this long term plan.

However, Trefis believes a potential deal with Entain is unlikely to spur stocks anytime soon. Indeed, the shares of the integrated resort operator have completely returned to their pre-Covid levels, mainly due to its presence in the sports betting industry through BetMGM. In contrast, the immediate competitors of MGM, Las Vegas Sands

LVS
and Wynn Resorts

WYNN
, have seen their stocks lag behind wider markets since January 2020 due to headwinds in Macau and Vegas. Another factor that strengthens our belief is that MGM’s $ 6.4 billion market capitalization gain since August 2020 is similar to Penn National’s $ 6.5 billion market capitalization gain over the same period. Penn National is also looking to follow a similar growth path to MGM over the next several years and has announced a series of acquisitions to strengthen its presence in the sports betting and iGaming market.

We highlight historical trends in MGM Resorts’ revenue, earnings and share price in an interactive dashboard analysis, Why has MGM Resorts stock gained 22% between the end of 2018 and now?

MGM Resorts Earnings Comparison with Penn National Gaming

In 2019, MGM Resorts generated $ 13 billion in total revenue, with a 50% contribution from the gaming segment. As the company’s properties are primarily located in the United States with a diverse product portfolio including table games and slots, its revenue growth has remained slow in recent years. Hence, the nascent sports betting industry is a strong revenue and profit opportunity for the business.

According to recent documents, MGM Resorts is aiming for a 15-20% market share in the sports betting and iGaming market. Considering a similar market share for Penn National Gaming, as pointed out in our previous analysis, its stock has gained $ 6.5 billion in market cap since August 2020. Thus, we believe that the increase of 6.4 billion dollars in MGM’s market capitalization, which also drove the stock’s full recovery to pre-crisis levels is driven by investors who expect the company to expand into the sports betting business . Therefore, we believe that the completion of the Entain acquisition is unlikely to result in further gains in MGM shares.

Overview of the sports betting industry

After the Supreme Court struck down the Professional and Amateur Sports Protection Act (“PASPA”), the sports betting and iGaming industry was brought into service in 25 states. Currently, Nevada, New Jersey and Pennsylvania account for nearly 75% of sports betting. When mature, the sports betting and iGaming industry is expected to reach $ 40 billion in the United States and $ 70 billion globally. Thus, several sports betting apps, including Fanduel, bet365, HardRock Café, BetMGM and William Hill, are targeting a significant slice of the pie.

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