MGM Resorts (MGM) Stock Lower After Analyst Note

NEW YORK (TheStreet) -- Shares of MGM Resorts International (MGM) were falling 1.5% to $19.53 Friday after analyst firm Susquehanna Financial lowered its price target for the casino operator.

In a note to investors discussing the gaming market in Macau, the analyst firm lowered its price target for MGM Resorts to $24 from $25, reiterating its "positive" rating, according to Benzinga.

Susquehanna analyst Rachel Rothman described the Macau gaming market as being "at a crossroads" due to concerns about table count, gaming revenue declines, and rumors of a complete smoking ban." Rothman also noted that June is the first month of negative year over year gaming growth in Macau though some investors are optimistic that one year headlines could signal an "inflection" in the industry.

"We continue to believe that Macau will eventually turn, but we remain cautious in the near term given the small sample size, the potential for a full smoking ban, and no signs of a significant easing in the anti-corruption campaign," Rothman said. "We encourage investors interested in Macau to focus on LVS and MGM given greater downside protection."

Separately, TheStreet Ratings team rates MGM RESORTS INTERNATIONAL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MGM RESORTS INTERNATIONAL (MGM) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MGM RESORTS INTERNATIONAL reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MGM RESORTS INTERNATIONAL continued to lose money by earning -$0.33 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus -$0.33).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 65.5% when compared to the same quarter one year prior, rising from $102.65 million to $169.85 million.
  • 37.74% is the gross profit margin for MGM RESORTS INTERNATIONAL which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.28% trails the industry average.
  • Net operating cash flow has decreased to $175.65 million or 39.59% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MGM RESORTS INTERNATIONAL's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: MGM Ratings Report

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