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MGM Resorts International - Stock Quote MGM

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Lowering Our Near-Term Macao Gaming Forecast Amid China’s Enduring Stringent COVID-19 Policy

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

We are reducing our 2022 and 2023 Macao industry gross gaming sales forecasts to mid-20% and 60% of 2019 levels, respectively, down from 40% and 70% prior, as China’s zero-tolerance COVID-19 policy looks to endure beyond our prior expectation of mid-2022. We are removing the 0.5% China country risk premium in our Las Vegas Sands and Wynn models and instead reflecting the near-term COVID-19 and structural Macao government oversight through our uncertainty rating, which now moves to very high from high on these two operators. Our reduced 2022-23 industry forecast lowers our respective fair value estimates on Las Vegas Sands (Macao 66% of estimated 2024 EBITDA), Wynn (53%), and MGM (13%) to $50, $104, and $47, from $52, $105, and $47.50. While shares of these companies trade at a discount to our intrinsic values, we expect their price movements to remain volatile in the near term.

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MGM Resorts International's Company Profile

Business Description

MGM Resorts is the largest resort operator on the Las Vegas Strip with 35,000 guest rooms and suites, representing about one fourth of all units in the market. The company's Vegas properties include MGM Grand, Mandalay Bay, Mirage, Luxor, New York-New York, and CityCenter. The Strip contributed approximately 49% of total EBITDAR in the prepandemic year of 2019. MGM also owns U.S. regional assets, which represented 29% of 2019 EBITDAR. We estimate MGM's U.S. sports and iGaming operations are currently a mid-single-digit percentage of its total revenue. The company also operates the 56%-owned MGM Macau casinos with a new property that opened on the Cotai Strip in early 2018. Further, we estimate MGM will open a resort in Japan in 2027.

3600 Las Vegas Boulevard South
Las Vegas, NV, 89109
T +1 702 693-7120
Sector Consumer Cyclical
Industry Resorts & Casinos
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Cyclical
Employees 69,000

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