Note: These are just the author’s thoughts, not official investing advice.
An industry stalwart
MGM Resorts International is a name synonymous with casinos. As one of the biggest companies of its kind in the world today, it owns iconic properties like the Bellagio, MGM Grand, and the Mandalay Bay, as well as maintaining a presence in the ever-expanding online gambling industry through its joint ownership of BetMGM.
constantly looking at new growth opportunities
The company successfully navigated the COVID-19 pandemic and has come out the other side in a strong position. It is constantly looking at new growth opportunities and finding ways to focus on its strengths. But with inflation raising and fears of a recession still hanging in the air, is MGM a good bet for those hoping to make a little money from investment?
Without further ado, we’ll take a look at the MGM Resorts share price, current company performance, and plans for the future to see if it’s worth backing today.
Recent results
MGM has thrived since the easing of pandemic restrictions in the US and Macau, hitting all-time records for Adjusted Property EBITDAR last year with MGM China and its Las Vegas Strip properties.
Overall net revenue reached $16.2bn in 2023, a 23% year-on-year rise driven by higher non-gaming revenue in Sin City and the ongoing resurgence in Macau. While the results of its regional operations dipped slightly, the group’s overall net profit amounted to $1.1bn.
MGM is following an asset-light approach these days, offloading the real estate assets of many of its resorts in recent years. The most notable move in this regard was selling its MGM Growth Properties real estate investment trust (REIT), which held 15 of its properties, for $17.2bn in 2022. This freed up more money for the company to explore opportunities both at home and abroad, with free cash flow reaching $1.8bn by the end of 2023.
The firm has plans to shed even more weight by axing its underwhelming facilities, such as the MGM Springfield in Massachusetts and the MGM Northfield Park in Ohio.
Exciting projects on the horizon
MGM is always on the lookout for lucrative new projects, such as in New York City, the United Arab Emirates (UAE), Japan, and Thailand. These are all markets with high potential that could elevate MGM above a lot of its competitors.
It is the only casino company so far to get the green light for a project in Japan, with MGM aiming to open an $8.5bn integrated resort in Osaka by the fall of 2030. This is estimated to generate annual revenue of more than $3.5bn when it is up and running. MGM will hold 40% ownership of the project.
A New York City casino could generate more than $2bn annually
The casino firm is also tipped to receive one of three highly-coveted downstate New York casino licenses. MGM operates an existing slots parlor facility beside the Yonkers Raceway called Empire City and this will get to offer table games if it gets approval. A New York City casino could generate more than $2bn annually, according to analysts.
Additionally, MGM has expressed interest in moving into the Thailand market as the government contemplates the development of at least five casino resorts in the tourist hotbed. It is the only non-Muslim ASEAN country without legal casinos.
Legal gambling could also be arriving in the UAE in the coming years, with MGM CEO Bill Hornbuckle expecting up to four casinos to open in the region. MGM is already building a $2.5bn non-gambling resort in Dubai that will contain three hotels. While it initially won’t have a gaming floor, the company is developing a space that could house one. Analysts believe that a UAE gaming sector would be worth more than Singapore’s $6.5bn industry.
BetMGM’s road to profitability
Another string in the company’s bow is its online gambling operation. While it is generally well behind both FanDuel and DraftKings in terms of market share, BetMGM has cemented third place with a 14% share of the country’s iGaming and sports betting markets.
The entry of more big hitters to the sportsbook sector in recent months like ESPN Bet and Fanatics appears not to have affected this position too much. However, time will tell if this lasts given the financial backing behind these new market joiners.
BetMGM is one of the first online operators to turn a profit since the US market opened up, doing so in the second half of last year. The brand’s net revenue almost reached $2bn in 2023, a 36% rise. With the operator expecting to generate $500m in core profit by 2026, things are certainly looking rosy for BetMGM going forward as it continues to leverage the already established MGM brand.
Share price outlook
The MGM Resorts share price took a substantial dip following the onset of the pandemic, falling below $10 at one point. It has steadily increased over time and now lies around the $45 mark, which is about half of its all-time high.
MGM repurchased about 54 million shares last year and $7.1bn worth of stock since 2021, indicating that the management views the share price as undervalued.
well positioned to take advantage of exciting new projects around the world
The company is focusing on what it does best – building and running casinos rather than getting bogged down by other distractions. Its balance sheet is well positioned to take advantage of exciting new projects around the world and BetMGM is only going to grow as more states legalize sports betting and iGaming.
While MGM has not reinstated its dividend since the pandemic, the share price still looks an attractive proposition for anyone looking for a reliable company in the gambling sector that still has plenty of room for growth.
