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Caesars and MGM Resorts Rise on Morgan Stanley Upgrades

The Las Vegas casino market is beginning a 'fast, strong recovery,' according to a Morgan Stanley analyst.

Caesars Entertainment  (CZR) - Get Caesars Entertainment Inc. Report and MGM Resorts Entertainment International  (MGM) - Get MGM Resorts International Report were rising Monday after Morgan Stanley upgraded the stocks of the casino companies to overweight from equal-weight.

Shares of Caesars Entertainment rose 3.45% to $92.01, while MGM Resorts was up 4.74% to $41.58.

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Analyst Thomas Allen said in research note that the Las Vegas casino market is beginning a “fast, strong recovery, with especially positive booking trends,” citing his visit to the U.S. gaming region last week.

The analyst raised his price target on Caesars stock to $113 from $92, and increased his MGM forecast to $45 from $34.

Allen said that the city was busy even in mid-week. 

He said that he had attributed that to spring break and the NCAA college basketball tournament. Industry participants told him bookings were even stronger than current occupancy and that booking windows were extending.

“The market is back to running at ~95% occupancy on weekends, with the operators able to push room rates higher,” the analyst said.

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Allen said that several market participants expect current government restrictions of 50% capacity, six-feet distancing “to be relieved” next month.

Caesars Entertainment recently joined the S&P 500 Index.

J.P. Morgan analyst Joseph Greff reiterated an overweight rating on Caesars with a $101 price target, up from $96.

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Meanwhile, Jefferies analyst David Katz reiterated his buy rating and $50 a share price target on MGM Resorts. 

He noted that the gross gaming revenue in Macau has increased in the first quarter, despite weaker-than-expected revenue from the Chinese New Year.

For the Las Vegas Strip, Katz said his alternative data suggested foot traffic improved more meaningfully in March, nearing 60% of pre-COVID levels.  

"We continue to believe that with accelerating vaccine rollout across the country, destination markets should see robust pent-up demand in the back half of the year," Katz said.

Last month, Katz upgraded MGM Resorts to buy from hold based upon the coronavirus stimulus package and the vaccine rollout.