S&P 500   5,111.16 (+0.29%)
DOW   39,008.40 (+0.03%)
QQQ   442.19 (+0.73%)
AAPL   179.09 (-0.92%)
MSFT   412.77 (-0.21%)
META   499.88 (+1.99%)
GOOGL   137.87 (-0.43%)
AMZN   177.38 (+0.35%)
TSLA   200.43 (-0.72%)
NVDA   808.13 (+2.15%)
NIO   5.76 (+0.17%)
AMD   201.38 (+4.60%)
BABA   74.56 (+0.72%)
T   16.96 (+0.18%)
F   12.56 (+0.96%)
MU   94.86 (+4.69%)
CGC   3.17 (-3.65%)
GE   158.69 (+1.15%)
DIS   111.92 (+0.30%)
AMC   4.35 (+0.69%)
PFE   26.59 (+0.11%)
PYPL   61.43 (+1.81%)
XOM   105.56 (+1.00%)
S&P 500   5,111.16 (+0.29%)
DOW   39,008.40 (+0.03%)
QQQ   442.19 (+0.73%)
AAPL   179.09 (-0.92%)
MSFT   412.77 (-0.21%)
META   499.88 (+1.99%)
GOOGL   137.87 (-0.43%)
AMZN   177.38 (+0.35%)
TSLA   200.43 (-0.72%)
NVDA   808.13 (+2.15%)
NIO   5.76 (+0.17%)
AMD   201.38 (+4.60%)
BABA   74.56 (+0.72%)
T   16.96 (+0.18%)
F   12.56 (+0.96%)
MU   94.86 (+4.69%)
CGC   3.17 (-3.65%)
GE   158.69 (+1.15%)
DIS   111.92 (+0.30%)
AMC   4.35 (+0.69%)
PFE   26.59 (+0.11%)
PYPL   61.43 (+1.81%)
XOM   105.56 (+1.00%)
S&P 500   5,111.16 (+0.29%)
DOW   39,008.40 (+0.03%)
QQQ   442.19 (+0.73%)
AAPL   179.09 (-0.92%)
MSFT   412.77 (-0.21%)
META   499.88 (+1.99%)
GOOGL   137.87 (-0.43%)
AMZN   177.38 (+0.35%)
TSLA   200.43 (-0.72%)
NVDA   808.13 (+2.15%)
NIO   5.76 (+0.17%)
AMD   201.38 (+4.60%)
BABA   74.56 (+0.72%)
T   16.96 (+0.18%)
F   12.56 (+0.96%)
MU   94.86 (+4.69%)
CGC   3.17 (-3.65%)
GE   158.69 (+1.15%)
DIS   111.92 (+0.30%)
AMC   4.35 (+0.69%)
PFE   26.59 (+0.11%)
PYPL   61.43 (+1.81%)
XOM   105.56 (+1.00%)
S&P 500   5,111.16 (+0.29%)
DOW   39,008.40 (+0.03%)
QQQ   442.19 (+0.73%)
AAPL   179.09 (-0.92%)
MSFT   412.77 (-0.21%)
META   499.88 (+1.99%)
GOOGL   137.87 (-0.43%)
AMZN   177.38 (+0.35%)
TSLA   200.43 (-0.72%)
NVDA   808.13 (+2.15%)
NIO   5.76 (+0.17%)
AMD   201.38 (+4.60%)
BABA   74.56 (+0.72%)
T   16.96 (+0.18%)
F   12.56 (+0.96%)
MU   94.86 (+4.69%)
CGC   3.17 (-3.65%)
GE   158.69 (+1.15%)
DIS   111.92 (+0.30%)
AMC   4.35 (+0.69%)
PFE   26.59 (+0.11%)
PYPL   61.43 (+1.81%)
XOM   105.56 (+1.00%)

MGM's Hot Hand Is All In For A Rally, After This Small Break

MGM Resorts International stock price The Chinese have a saying concerning the reality of the haves and have-nots and how they should deal with their finances. Those who have riches or inherit them can afford to speculate with small sums of money, while those who do not have wealth and are part of the middle class have to speculate with large sums of money to get rich. This could not be further from the truth in MGM Resorts International's NYSE: MGM first-quarter 2023 earnings results on Monday.

Key Points

  • MGM Resorts International has reported its first quarter 2023 earnings, showcasing a recovery in consumer gambling and leisure activities in Macau, China.
  • MGM management presentation shows expansion activity in Japan and their digital betting platform BetMGM, which expects positive results by the end of 2023. 
  • Analysts expect a double-digit upside in the stock; they may arrive at this target by connecting the dots between MGM's actual performance and this U.S. economic indicator, which shows signs of bullish momentum for the stock. 
  • 5 stocks we like better than MGM Resorts International

While the majority of revenues for MGM come from its Las Vegas, Nevada operations, the bulk of growth seen in the twelve months came from its Macau, China location. Las Vegas delivered annual 31% revenue growth for $2.2 billion, while Macau reported a total of $618 million of revenue, rising by a tremendous 84% from a year prior. 

The Takeaway Chips

Overall revenue for MGM Resorts grew by 36% year-on-year for the first quarter of 2023; what this all meant, apart from signs of a recovering economy and rising levels of disposable income, is that investors got to keep more of this income. Net income in 2022 reported a total loss of $229 million, while 2023 reported a net gain of $335.3 million, performing at a 9% margin. Historically speaking, MGM still has a push left, considering that net income margins have hovered inside the 13-16% range, so the bull cycle may not be over for the stock price yet.

Management is focused not on exploiting existing operations but improving them via room remodels at Bellagio and convention center improvements aiming at elevated customer experiences. According to the earnings presentation, management has also reported a successful development approval for a new location in Osaka, Japan, which was government-certified by April 14, 2023. It is expected to be operational by 2029/2030.

Additionally, the typical business model adopted by the gambling industry, casinos, and hotels, is being disrupted by online and digital gambling. MGM is aware of this pivoting force and has also started its own platform; BetMGM is the American giant's proprietary gaming and betting platform expected to be EBITDA positive by the second half of 2023. BetMGM, despite being the newer segment for MGM, carries over the brand reputation and adoption by consumers, as reflected in its $476 million in revenues for the first quarter of 2023.


Connecting the Dots, Investor Spotlight

In the United States, the savings rate has increased to a current 5.1% from its bottom in June 2022 of 2.7%. A near doubling of the savings rate may translate into consumers feeling more comfortable spending - or gambling - more of their income as there is now a safety net to hold them in case the house wins. Cross-referencing the savings rate in the U.S. with MGM financials, it becomes evident that revenues tend to rise and fall alongside this rate, which could be explained by the psychological effects of saving levels and the tendency to gamble or seek leisure activities.

MGM analyst ratings may take notice of this macro trend connection, and expecting a slowdown in credit markets and other risks of a mild recession pushing the savings rate upward, have come together to assign a 23% upside target from today's prices. Moreover, credibility for these targets may be sustained once investors realize that management has repurchased nearly 65 million shares from the open market throughout 2022, implying that the stock may have been cheap back then as it is now.

MGM stock is trading on an 8.5x price-to-earnings multiple, considering the last-twelve-months of earnings. Historically the stock has traded in multiples upwards of 18-20x, thus severely undervaluing today's business fundamentals and further upside potential that could be realized as macroeconomic conditions, along with China's reopening transition, play their hand. As with net income margins showing enough ceiling room to push toward normalized levels, returns metrics in MGM show a similar gap. 

ROIC (Return On Invested Capital) stood at 5% for the first quarter of 2023; this profitability metric reached a ceiling of 6.7% in pre-pandemic conditions during 2019. Consequently, the United States savings rate also rose to nearly 10% to double today's 5.1% rate, giving investors and analysts some toggling room when modeling projections and correlations between profitability and the savings rate, ultimately driving consumer spending psychology.

→ Revolutionary Device Redefines Cancer Detection (From Vita Imaging) (Ad)

Should you invest $1,000 in MGM Resorts International right now?

Before you consider MGM Resorts International, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and MGM Resorts International wasn't on the list.

While MGM Resorts International currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

10 Best Stocks to Own in 2024 Cover

Click the link below and we'll send you MarketBeat's list of the 10 best stocks to own in 2024 and why they should be in your portfolio.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
MGM Resorts International (MGM)
4.828 of 5 stars
$42.96-0.7%N/A13.55Moderate Buy$54.90
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


Featured Articles and Offers

Search Headlines: