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Why Shares of MGM Resorts Plunged 49.5% in the First Half of 2020

By Travis Hoium – Updated Jul 9, 2020 at 1:24PM

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There's no sugarcoating a terrible year for the gambling industry.

What happened 

Shares of gambling industry giant MGM Resorts International (MGM -1.33%) fell 49.5% in the first half of 2020, according to data provided by S&P Global Market Intelligence, as the industry was shut down around the world. And there's no telling when business will return to normal. 

So what 

COVID-19 closed MGM Resorts' properties from Macao to Springfield, Massachusetts, causing the stock to drop in the first half of the year. Not only are investors disappointed with the drop in revenue, but they also have to question if big casino companies will survive should the pandemic last for a year or more. 

Roulette wheel with a black background.

Image source: Getty Images.

MGM Resorts has shored up its balance sheet with $4.6 billion in cash and a monthly cash burn of just $270 million. But we still don't know when vacationers and business customers are going to return to Las Vegas, Macao, or the regional casinos MGM has scattered across the country.

Now what 

MGM has enough cash to last over a year without business returning to normal. And while it's uncertain when that will happen, I think this is a company that will benefit quickly when consumers are allowed to go out again. After the sharp drop in shares, this could even be a great value stock in the gambling industry, which doesn't happen all that often. 

Travis Hoium 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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