What happened
Shares of casino operator MGM Resorts International (MGM 0.99%) were up by roughly 10% at 10:30 a.m. EDT on Wall Street. They pulled back a little from that peak, but were still up in the high single digits by 11:30 a.m. Investors appear to be anticipating good news from the company on June 4.
So what
On May 27, MGM announced that it would reopen some of its properties in Las Vegas on June 4, notably the iconic Bellagio, New York-New York, MGM Grand Las Vegas, and The Signature. Basically all of the company's operations had been shut down because of the global effort to contain the spread of COVID-19. However, as social distancing rules have been eased and non-essential businesses have been, slowly, allowed to reopen, MGM is hoping it can get back to business as usual as quickly as possible.
Image source: Getty Images.
Of course, the first step is opening the doors. And investors, it seems, are bidding the stock higher in anticipation of a successful restart on June 4. Although there's no way to know what will happen when Las Vegas starts to reopen, there's actually good reason to be excited. When regional casinos along the U.S. Gulf Coast reopened over the Labor Day holiday weekend, they saw gambling revenue increase 17% year over year, according to The Sun Herald. That was likely driven by pent-up local demand. Although Las Vegas is more of a destination for out of town clientele, the Gulf Coast results speak to a desire for gamblers to get back in the action. That's a clear positive, and it looks like investors are extrapolating it to Las Vegas and MGM Resorts.
Now what
There's still a lot of uncertainty for casino operators like MGM as they look to restart their businesses. They will face higher costs because of new cleaning regimens and they will likely need to operate below pre-COVID-19 capacity to accommodate social distancing. Even if the opening weekend is a smashing success, long-term investors should tread carefully. There's still likely to be material volatility from here, especially if the COVID-19 containment efforts lead to a global recession.
