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Investing.com - Seaport Global Securities downgraded MGM Resorts (NYSE:MGM) from Buy to Neutral on Tuesday, citing limited upside potential despite strong recent performance. According to InvestingPro data, MGM currently trades at a P/E ratio of 16.5x with a market capitalization of $10.1 billion, while analyst price targets range from $34 to $59 per share.
The research firm noted that MGM China (OTC:MCHVY) has been a strong outperformer since emerging from COVID in early 2023, gaining over 600 basis points of market share compared to 2019. The Macau operation likely improved its market share by over 70 basis points quarter-over-quarter, potentially leading to its strongest or second-strongest quarter ever. This performance has contributed to MGM’s overall revenue growth of 2.69% and EBITDA of $2.45 billion in the last twelve months.
Seaport Global expressed concerns about Las Vegas operations showing signs of slowdown, estimating second-quarter revenue declines of 3.5% year-over-year and EBITDAR declines of 5% year-over-year with 35% margin. The firm also projected U.S. regional revenue to decrease 1% year-over-year with EBITDAR declining 1.7%.
The downgrade reflects expectations that MGM will increase capital spending in the U.S., including continued MGM refurbishment, potential New York casino license expansion, and Japan investment, which will likely reduce share buybacks. Seaport Global noted the Japan casino resort isn’t expected to open until at least 2031. InvestingPro analysis shows that management has been aggressively buying back shares, one of several key insights available in the comprehensive Pro Research Report covering MGM’s financial health and growth prospects.
Seaport Global also highlighted investor skepticism about BetMGM and MGM’s digital strategy, suggesting that unlocking value may require acquisition of the BetMGM stake or full acquisition of Entain, which could be transformational despite potential near-term dilution. For deeper insights into MGM’s valuation and growth potential, investors can access detailed financial metrics and expert analysis through InvestingPro, which offers comprehensive coverage of over 1,400 US stocks.
In other recent news, MGM Resorts has seen a variety of analyst actions and legislative developments that could impact its financial outlook. Stifel has raised its price target for MGM Resorts to $48, maintaining a Buy rating, due to anticipated demand in late 2025 and 2026, particularly in Las Vegas, and strong performance in regional assets. Meanwhile, Goldman Sachs initiated coverage with a Sell rating and a $34 price target, expressing concerns over MGM’s lease obligations and capital expenditure plans, which may affect free cash flow. JPMorgan also began coverage with a neutral rating and a $38 price target, citing Las Vegas Strip earnings momentum but noting a cautious macroeconomic outlook.
Additionally, Citizens JMP maintained a Market Outperform rating with a $45 price target, observing a slight increase in short-term bookings in Las Vegas, which MGM is monitoring but does not find concerning. There is potential revenue uplift from new tax legislation allowing tipped employees to deduct a portion of their tips, which could benefit MGM Resorts in the short term. However, this tax provision is set to expire in 2028. Each of these developments highlights the varied factors influencing MGM Resorts’ current and future performance.
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