MGM Climbs on Upgrade to Buy Amid Stimulus Package, Vaccines

MGM Resorts International should benefit from strong pent-up demand for leisure travel, a Jefferies analyst says.
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MGM Resorts International  (MGM) - Get Report rose Monday after a Jefferies analyst upgraded shares of the casino and entertainment company to buy from hold based upon the coronavirus stimulus package and the vaccine rollout.

Shares of the Las Vegas-based company were up nearly 5% to $40.92.

Analyst David Katz, who also raised his price target to $50 from $36, said in an investors' note that a key catalyst for his upgrade was an improved macro outlook through 2022.

"With forthcoming stimulus and further vaccine roll-out, we expect strong pent-up demand for leisure travel and particularly group travel," Katz said. "We expect the Las Vegas recovery to steepen in 2H21 through FY22, which drives MGM's ten properties."

In addition, Katz said evidence is building that the gaming site BetMGM is establishing itself among the leaders in digital gaming. While still early, Katz noted the site's launch in Michigan was encouraging.

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"In the near term, digital remains the most immediately productive aspect of the story, as the Las Vegas recovery will continue to evolve and debate around its trajectory will continue-we believe it should be steeper than most," Katz said. "The regional markets should remain productive and Macau will eventually resume a normal level." 

However, the analyst said, "the recent performance of BetMGM is the most likely driver to continue pushing the shares higher."

"In the end, MGM remains among the most complex models in our coverage, but has business lines that should grow," Katz said, "a nascent domestic digital business that comprises 24% of our price target and an appropriate Board and management team."

Other gaming stocks were climbing Monday, including Las Vegas Sands  (LVS) - Get Report, Wynn Resorts  (WYNN) - Get Report and Caesars Entertainment  (CZR) - Get Report.

Last month, Argus analyst John Staszak raised his rating on MGM to buy from hold with a $42 price target. 

MGM reported a slight fourth-quarter revenue miss in February. The company saw a 66% decline in revenue to $480 million from its properties on the Las Vegas Strip, while revenues at its MGM China property in Macau dropped 58% year-over-year to $305 million.