MGM’s SWOT analysis: stock faces challenges amid expansion plans

MGM Resorts International, a prominent player in the U.S. gaming, leisure, and lodging industry with a market capitalization of $9.53 billion, finds itself at a crossroads as it navigates a complex landscape of opportunities and challenges. With significant operations in Las Vegas and Macau, as well as a growing digital gaming presence, MGM is positioning itself for long-term growth while grappling with near-term headwinds. According to InvestingPro data, the company maintains strong profitability with $17.2 billion in revenue over the last twelve months.

Company Overview and Recent Performance

MGM Resorts has maintained a solid performance across its portfolio, with particularly strong results in Macau and its digital gaming segment. The company’s first-quarter 2025 revenue aligned with expectations, while EBITDAR exceeded consensus by 2%, excluding business insurance proceeds. Las Vegas operations saw a 4% year-over-year growth in EBITDAR when adjusted for non-recurring items. InvestingPro data reveals the company generated $2.4 billion in EBITDA over the last twelve months, with management actively buying back shares to enhance shareholder value.

Despite these positive indicators, MGM faces challenges in its core Las Vegas market. Analysts note a slowdown in the Las Vegas market, with average daily rates trending downward and a shorter booking window. To counteract this trend, MGM is focusing on attracting a wealthier, higher-spending cohort and increasing prices across non-gaming offerings.

Digital Gaming and BetMGM

A bright spot in MGM’s portfolio is its digital gaming division, particularly BetMGM. The online platform has shown significant growth, increasing its iGaming market share by 77 basis points month-over-month to reach 23% in February 2025, up from 21.5% in Q4 2024. This positions BetMGM as the third-largest sportsbook in the U.S., trailing behind Fanatics by approximately 80 basis points in handle market share.

However, BetMGM faces challenges in app performance. Analysts highlight app latency as a primary issue affecting its OSB handle share. While app speed has improved, it still lags behind leading products in the market. The company is working to address these technical issues to enhance user experience and maintain its competitive edge. With a beta of 1.69, MGM’s stock shows higher volatility than the market average, reflecting both the challenges and opportunities in its digital gaming expansion. For deeper insights into MGM’s digital strategy and growth metrics, explore the comprehensive analysis available on InvestingPro.

Expansion Plans and Capital Expenditure

MGM has ambitious expansion plans, with significant capital expenditure projects in the pipeline. The company plans to spend approximately $2.7 billion in capital expenditures from 2023 to 2025, focusing on long-dated projects in Japan, potential developments in New York, and renovations in Las Vegas.

While these investments position MGM for future growth, they also present challenges. The high capital expenditure is expected to increase leverage and potentially limit shareholder returns in the near term. Analysts project that EBITDAR will remain relatively flat during this investment period, raising concerns about the company’s ability to generate immediate returns on these substantial investments.

Financial Outlook

Despite the challenges, MGM’s financial outlook remains relatively stable. Analysts have adjusted their EBITDAR estimates for 2025-2026 to $4,611M and $4,787M, respectively. The company has also announced a new $2 billion share repurchase program, signaling confidence in its financial strategy despite the increased leverage. InvestingPro analysis indicates a high shareholder yield and strong free cash flow yield of 13%, though the debt-to-equity ratio stands at 10.62x. Based on InvestingPro’s Fair Value model, MGM’s stock currently trades near its fair value, suggesting balanced market pricing.

MGM’s valuation currently reflects some of the market’s concerns. The company is trading at 5.8x 2026E consensus EBITDA, which is 23% under its five-year average, suggesting the stock may be undervalued. However, the lack of near-term growth catalysts and full operational company exposure are seen as barriers to MGM’s valuation returning to historical levels.

Bear Case

How might the Las Vegas market slowdown impact MGM’s revenue?

The slowdown in the Las Vegas market poses a significant risk to MGM’s revenue streams. With average daily rates trending downward and shorter booking windows, the company may face challenges in maintaining its pricing power. This could lead to reduced margins and potentially lower overall revenue from its Las Vegas operations, which have historically been a cornerstone of MGM’s business.

Additionally, the shift towards higher-end customers and increased pricing for non-gaming offerings may not fully offset the decline in overall visitation. If economic conditions worsen, even the high-end segment could become more price-sensitive, further pressuring MGM’s revenue in its key market.

What risks does MGM face with its high capital expenditure plans?

MGM’s substantial capital expenditure plans, totaling approximately $2.7 billion from 2023 to 2025, present significant risks to the company’s financial stability. These investments, while potentially beneficial in the long term, are expected to increase leverage and limit free cash flow in the near term.

The company faces the risk of project delays or cost overruns, particularly in complex international projects like the one in Japan. Moreover, if the expected returns on these investments do not materialize as quickly as anticipated, MGM could find itself in a challenging financial position with increased debt and reduced flexibility to respond to market changes or unforeseen challenges.

Bull Case

How could BetMGM’s growth contribute to MGM’s overall performance?

BetMGM’s strong performance and growing market share in the digital gaming space present a significant opportunity for MGM Resorts. As the online gaming and sports betting markets continue to expand, BetMGM’s increasing market share could translate into substantial revenue growth for MGM.

The digital platform’s success also provides MGM with diversification away from its traditional brick-and-mortar operations, potentially offering a hedge against fluctuations in the physical casino market. Furthermore, BetMGM’s customer base could be leveraged to drive traffic to MGM’s physical properties, creating synergies between the online and offline segments of the business.

What potential benefits could MGM’s expansion plans bring to the company?

MGM’s ambitious expansion plans, including projects in Japan and potential developments in New York, could position the company for significant long-term growth. These new markets offer the potential for increased revenue streams and geographic diversification, reducing MGM’s reliance on its Las Vegas and Macau operations.

The expansion into Japan, in particular, could provide access to a lucrative new market with high-spending customers. Similarly, a presence in New York could tap into a densely populated area with strong tourism potential. If executed successfully, these projects could substantially increase MGM’s market share and establish the company as a truly global gaming and hospitality leader.

SWOT Analysis

Strengths:

• Strong brand recognition and market position in Las Vegas
• Growing digital gaming presence through BetMGM
• Diversified portfolio of properties across multiple markets
• Ability to attract high-end consumers

Weaknesses:

• App latency issues affecting BetMGM’s competitive position
• High capital expenditure pressure impacting short-term financials
• Vulnerability to economic cycles in core markets

Opportunities:

• Expansion into new markets (Japan, New York)
• Growth potential in online gaming and sports betting
• Increasing convention and group business in Las Vegas
• Potential for cross-selling between digital and physical properties

Threats:

• Increased competition in both physical and digital gaming markets
• Regulatory changes affecting the gaming industry
• Economic downturns impacting consumer discretionary spending
• Potential for oversaturation in key markets

Analysts Targets

• Stifel: Buy, $38.91 (September 3rd, 2025)
• Barclays: Overweight, $43.00 (May 1st, 2025)
• Citizens Bank: Market Outperform, $45.00 (May 1st, 2025)
• JMP Securities: Market Outperform, $50.00 (April 8th, 2025)

MGM Resorts International faces a complex landscape of opportunities and challenges as it navigates market uncertainties and pursues ambitious expansion plans. While the company’s strong brand and growing digital presence offer significant potential, it must carefully manage its capital expenditures and operational challenges to maintain its competitive edge in the evolving gaming and hospitality industry. With a P/E ratio of 19.12x and a current ratio of 1.22, MGM maintains reasonable valuation metrics and adequate liquidity. Discover more exclusive insights and detailed analysis through InvestingPro’s comprehensive research platform, featuring additional ProTips and advanced financial metrics. The analysis in this article is based on information available up to September 17, 2025.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on MGM. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore MGM’s full potential at InvestingPro.

Should you invest in MGM right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if MGM is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate MGM further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if MGM appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.