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Why MGM Resorts Stock Fell 6% Today

By Reuben Gregg Brewer - Jun 24, 2020 at 11:40AM

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There's been a lot of good news for the casino operator, but the outlook is still less than certain.

What happened

Shares of casino operator MGM Resorts International (MGM -0.60%) fell roughly 6% in early trading on Wednesday. This move, however, needs to be put into a broader context. Although MGM's stock is still down around 45% for the year, it is well off its March nadir, when it was lower by roughly 75%. So while today's decline is notable on an absolute basis, it's not that big in the grand scheme of 2020. 

So what

The obvious problem here is COVID-19. The coronavirus effectively shut down MGM Resorts' casino operations when the government closed nonessential businesses and asked citizens to practice social distancing. As the economy has begun to reopen, the company's casinos have been slowly welcoming customers back through their doors. That's the good news and helps explain why the stock is up off its worst levels of the year.

A gambling table with dice and chips on it

Image source: Getty Images.

But MGM Resorts is operating under occupancy restrictions and with new health requirements. It's unclear just yet what impact this will have on its financial results.

And there's the not-so-subtle issue of continued business improvement being highly reliant on the progress in containing COVID-19. With many of the early states that moved to reopen their economies starting to see an uptick in coronavirus cases, there are concerns that the casino recovery won't be smooth.

In particular, Nevada is seeing a notable increase in cases. And that's providing the downward pressure on MGM Resorts' shares today, due the company's sizable presence in this key gambling state.  

Now what

There are very real concerns here that operating a casino is no longer the same as it was before COVID-19. And beyond that admittedly broad statement, there is a great deal of uncertainty because the U.S. is still very much dealing with the impact of this health crisis. Until there's far more clarity, investors should expect continued volatility in MGM Resorts' shares.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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