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

MGM Resorts International (NYSE:MGM), a leading player in the U.S. gaming, leisure, and lodging industry with a market capitalization of $8.5 billion, finds itself at a crossroads as it navigates a complex landscape of challenges and opportunities. Trading at $31.28, the stock has experienced significant volatility, declining nearly 8% in the past week and 21% over the last year. With significant operations in Las Vegas and Macau, as well as a growing digital gaming presence, MGM’s performance has been a mixed bag in recent months, prompting analysts to reassess their outlook on the company’s stock. InvestingPro analysis indicates the company maintains a "Fair" overall financial health score, balancing growth potential with current market challenges.

Las Vegas Market Performance

MGM’s Las Vegas operations, a cornerstone of its business, have faced headwinds in recent months. Analysts note declining volumes and room revenue, which have put pressure on the company’s performance in this key market. The high-end property mix in MGM’s portfolio may provide some insulation against these trends, but concerns persist about the overall health of the Las Vegas market.

The booking window for Las Vegas properties has shortened, indicating potential consumer hesitancy. This shift in consumer behavior has led MGM to focus on attracting a wealthier, higher-spending cohort to offset the impact of reduced visitation. The company has also implemented strategies to increase prices across non-gaming business segments to bolster revenue.

Despite these challenges, MGM’s Las Vegas operations have shown resilience. In the first quarter of 2025, Las Vegas EBITDAR grew by 4% year-over-year when adjusted for non-recurring items. Management expects EBITDAR to be "flat to up" from the second quarter to the fourth quarter of 2025, suggesting a cautiously optimistic outlook for the remainder of the year.

Macau Operations

In contrast to the challenges faced in Las Vegas, MGM’s Macau operations have shown improvement. Analysts highlight the strong performance in this region, which has helped to offset some of the pressures experienced in the domestic market. The recovery in Macau’s gaming sector has provided a boost to MGM’s overall financial results, contributing positively to the company’s diversified portfolio.

BetMGM and Digital Gaming

BetMGM, the company’s online sports betting and gaming platform, has emerged as a bright spot in MGM’s portfolio. Despite facing challenges such as app latency issues, which have affected its online sports betting (OSB) handle share, BetMGM has shown promising results and market share growth.

In February 2025, BetMGM increased its iGaming market share by 77 basis points month-over-month, reaching 23% compared to 21.5% in the fourth quarter of 2024. This consistent growth in market share indicates strong performance and competitive positioning in the digital gaming space.

The single-app rollout in Nevada offers potential for improved user acquisition, and analysts have raised their estimates for BetMGM due to an extra month of performance reporting. The success of BetMGM is seen as a positive factor for MGM’s overall business, although the partial ownership structure (with Entain holding 50%) is viewed by some analysts as an overhang.

Financial Performance and Outlook

MGM’s financial performance has been mixed, with analysts adjusting their estimates in response to recent trends. According to InvestingPro data, five analysts have recently revised their earnings estimates downward for the upcoming period, though the company remains profitable with a last twelve months revenue of $17.2 billion and an EBITDA of $2.4 billion. For the third quarter of 2025, consolidated revenue and EBITDAR estimates have been revised downward, reflecting softer trends in some segments of the business.

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Despite these adjustments, MGM’s valuation remains a topic of debate among analysts. As of May 2025, the company was trading at 5.8x 2026E consensus EBITDA, which is 23% under its five-year average. This valuation suggests that the stock may be undervalued, particularly if the company can deliver on its growth initiatives and cost-saving measures.

The company’s improved cost structure and operating leverage are seen as positive factors that could help MGM better withstand economic downturns compared to previous periods, such as the Global Financial Crisis. The company maintains a healthy current ratio of 1.22 and has demonstrated strong cash generation with a free cash flow yield of 15%. Management has also been actively supporting shareholder value through aggressive share buybacks, as highlighted in InvestingPro’s analysis.

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Capital Expenditure and Expansion Plans

MGM has outlined significant capital expenditure plans, with approximately $2.7 billion allocated for the period from 2023 to 2025. This investment includes long-dated projects in Japan, potential developments in New York, and renovations in Las Vegas. While these investments are aimed at driving long-term growth, they also raise concerns about increased leverage and potential limitations on shareholder returns in the near term.

The company’s expansion strategy extends beyond 2025, with additional projects in the pipeline. MGM’s management has expressed confidence in the company’s ability to generate healthy free cash flow to support these initiatives, although some analysts caution that the increased capital outlay could pressure financial metrics in the short term.

Competitive Landscape

In the highly competitive gaming and hospitality industry, MGM continues to position itself as a leader through strategic initiatives and partnerships. The company’s partnership with Marriott (NYSE:MAR) is expected to support growth, particularly in attracting high-value customers to its properties.

MGM’s focus on cost-saving measures and operational efficiencies has helped to mitigate some of the pressures faced in the market. Labor costs in Las Vegas have moderated, and the company has achieved other cost reductions that are expected to contribute to improved margins.

The robust convention market and non-gaming expansion efforts are seen as potential catalysts for growth, with some analysts projecting that MGM could achieve record levels in these areas by 2026.

Bear Case

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

The slowdown in the Las Vegas market poses a significant challenge for MGM, given the importance of this region to the company’s overall business. The decline in average daily rates (ADR) and shorter booking windows could lead to reduced revenue and profitability from MGM’s Las Vegas properties. This trend may be exacerbated if economic conditions worsen, potentially leading to a decrease in discretionary spending on travel and entertainment.

Moreover, the pressure on room rates could spread to other segments of MGM’s Las Vegas operations, including gaming and non-gaming amenities. If the company is unable to effectively attract and retain high-value customers or increase spending per visitor, it may struggle to meet financial targets and maintain investor confidence.

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

MGM’s ambitious capital expenditure plans, totaling approximately $2.7 billion from 2023 to 2025, present several risks to the company’s financial health and operational flexibility. The significant investment in long-dated projects, such as those in Japan and potentially New York, could strain the company’s balance sheet and increase leverage at a time when market conditions are uncertain.

There is also the risk that these projects may not deliver the expected returns on investment, particularly if economic conditions deteriorate or if there are unforeseen regulatory changes in the target markets. The increased leverage resulting from these investments could limit MGM’s ability to return capital to shareholders through dividends or share repurchases, potentially making the stock less attractive to income-focused investors.

Furthermore, the focus on large-scale expansion projects may divert management attention and resources from addressing immediate challenges in existing markets, such as the slowdown in Las Vegas. This could potentially lead to underperformance in core operations while the company waits for new projects to come online and generate returns.

Bull Case

How could BetMGM’s growth contribute to MGM’s long-term success?

BetMGM’s strong performance and market share growth in the online gaming and sports betting space present a significant opportunity for MGM’s long-term success. As the digital gaming market continues to expand, BetMGM’s increasing market share positions MGM to capture a larger portion of this growing revenue stream.

The platform’s success in iGaming, with market share reaching 23% in February 2025, demonstrates its ability to compete effectively in the digital space. As BetMGM continues to improve its app performance and expand its offerings, it could become a major contributor to MGM’s overall revenue and profitability.

Moreover, the potential for cross-selling opportunities between BetMGM’s online customers and MGM’s brick-and-mortar properties could create synergies that enhance the value of both segments. This integrated approach could help MGM differentiate itself from competitors and build a more loyal customer base across its various offerings.

What potential benefits could MGM realize from its expansion projects?

MGM’s expansion projects, while capital-intensive in the short term, have the potential to drive significant long-term growth and diversification for the company. The investments in Japan and potentially New York represent opportunities to enter new markets with high growth potential and establish MGM as a global leader in integrated resort development.

These projects could provide MGM with access to new customer bases and revenue streams, reducing the company’s reliance on its Las Vegas and Macau operations. Successful execution of these expansions could lead to increased brand recognition, economies of scale, and improved negotiating power with suppliers and partners.

Furthermore, the development of new properties allows MGM to incorporate the latest technologies and amenities, potentially setting new standards in the industry and attracting high-value customers. This could help the company command premium pricing and achieve higher margins across its portfolio.

SWOT Analysis

Strengths:

• Strong brand recognition and high-end property mix
• Improved cost structure and operating leverage
• Diversified portfolio across Las Vegas, Macau, and online gaming
• Successful BetMGM platform with growing market share

Weaknesses:

• App latency issues affecting online sports betting performance
• High capital expenditure requirements for expansion projects
• Partial ownership structure of BetMGM limiting full control

Opportunities:

• Expansion into new markets through projects in Japan and potentially New York
• Growth potential in online gaming and sports betting markets
• Cross-selling opportunities between online and brick-and-mortar operations
• Potential for market share gains in recovering Macau market

Threats:

• Las Vegas market slowdown and shorter booking windows
• Increased competition in both traditional and online gaming sectors
• Regulatory changes affecting gaming operations in various jurisdictions
• Economic uncertainties impacting consumer discretionary spending

Analysts Targets

• BTIG: No specific target (October 13, 2025)
• Stifel: $38.91 (September 3, 2025)
• Citizens Bank: $45.00 (May 1, 2025)
• Barclays: $43.00 (May 1, 2025)
• JMP Securities: $50.00 (April 8, 2025)

This analysis is based on information available up to October 13, 2025, and reflects the views and projections of various analysts and financial institutions regarding MGM Resorts International’s stock performance and business outlook. With analyst price targets ranging from $34 to $57, and the stock’s current RSI indicating oversold conditions, investors may find value in conducting further research through InvestingPro’s comprehensive analysis tools and real-time market data.

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