Why MGM Resorts International Stock Is Worth a Wager

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MGM Resorts International


MGM-NYSE

Overweight • Price $41.43 on Feb. 8

by J.P. Morgan

Following MGM’s strong 4Q 2022 results, we increase our year-end 2023 stock price target to $54 from $48. MGM offers an appealing combination of

(1) Las Vegas Strip exposure;

(2) Macau recovery (still in the early innings, with MGM’s market share 16% in January, versus 9%-10% historically);

(3) digital-betting ramp-up (with BetMGM migrating to 2H profitability, along with most of its peers);

(4) a strong capital structure, with lots of liquidity (an estimated $11/share of excess cash at year-end 2023);

(5) an attractive free-cash-flow yield (11%, adjusted, with an undemanding valuation); and

(6) the absence of a sizable M&A overhang, as MGM’s CEO has indicated that it has moved on from its pursuit of


Entain


(ticker: ENT.UK) to gain control of the other 50% of BetMGM [that it doesn’t already own] and its other digital cash-flowing businesses.