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On Thursday, CFRA analyst Zachary Warring adjusted the outlook for MGM Resorts International (NYSE:MGM), moving the stock rating from Buy to Hold. The firm also revised their 12-month price target downward to $31.00, a decrease from the previous target of $45.00. According to InvestingPro data, MGM’s stock currently trades at $30.93, with analysts’ targets ranging from $35 to $60, suggesting potential upside despite recent volatility. The stock has experienced a challenging period, down about 21% over the past year. This new target is based on a valuation of 8 times the firm’s adjusted EBITDAR estimate for 2025, which is lower than the company’s three-year average multiple of 9.7x.
Despite the downgrade, CFRA raised their earnings per share (EPS) estimate for MGM Resorts for the year 2025 by $0.10, setting it at $3.30, while maintaining the 2026 EPS forecast at $2.60. This adjustment comes after MGM Resorts reported a normalized first-quarter EPS of $0.69, surpassing consensus estimates by $0.23, on revenues of $4.3 billion, which fell slightly short of estimates by $7 million. InvestingPro analysis shows MGM maintains a "GOOD" overall financial health score, with particularly strong relative value metrics and a P/E ratio of 12.8x.
MGM Resorts saw a year-over-year decline in Las Vegas revenues by 3%, attributed primarily to a lower average daily room rate, especially in comparison to the previous year when the Super Bowl was hosted in the city. However, the company experienced higher casino revenue in Las Vegas due to increased win rates in both table games and slots. The Regional segment of MGM’s operations witnessed a 1% dip in revenues, but EBITDA rose by 2% due to insurance proceeds related to a cybersecurity incident in 2023.
The performance in MGM China (OTC:MCHVY) also reflected a downturn, with revenues and EBITDA decreasing by 3% and 5%, respectively, due to weaker casino revenue. MGM’s Digital segment reported flat sales, while adjusted EBITDA saw a decline, moving from a loss of $19 million to a loss of $34 million.
The revision of CFRA’s rating for MGM Resorts was influenced by concerns over weakening consumer sentiment and limited growth prospects for the company. Despite these concerns, InvestingPro data reveals the company’s strong fundamentals, including a healthy current ratio of 1.3 and positive free cash flow yield of 14%. For deeper insights into MGM’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 7 additional ProTips and over 30 financial metrics.
In other recent news, MGM Resorts International reported its Q1 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.69, significantly higher than the forecasted $0.49. Despite slightly missing its revenue forecast with $4.28 billion, the company highlighted substantial growth from BetMGM, which saw a 34% increase in net revenue. Analysts at Citi responded to MGM’s strong performance by raising the company’s price target to $52, maintaining a Buy rating, citing confidence in the company’s strategic initiatives and partnerships. Meanwhile, Stifel adjusted their outlook by lowering the price target to $44, though they retained a Buy rating, reflecting a cautious approach amid potential economic challenges. MGM Resorts is also focusing on expansion, with significant investments in projects such as the Osaka development in Japan, expected to open in 2030, and a proposal for a new development in New York. The company aims for a high-teen return from the Osaka project, with equity commitments translating to approximately $600-700 million annually from 2025 to 2028. These developments reflect MGM’s strategic growth plans and market confidence, despite broader economic uncertainties.
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