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Why MGM Resorts International Stock Jumped 6.5% at the Open Today

By Reuben Gregg Brewer – Aug 27, 2020 at 11:08AM

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MGM Resorts opened up in another market today, both in the way you think and in an entirely new way, too.

What happened

Shares of casino operator MGM Resorts International (MGM -1.30%) rose as much as 6.5% in the first hour of trading on Thursday. Although today's advance is nice to see, it's important to remember that the stock is still down around 30% for the year in 2020. Which, when you step back and look at the big picture, helps explain why investors were so excited about two bits of news today.

So what

The backstory here is centered around COVID-19, which led governments to shut down non-essential businesses like casinos earlier in the year in an effort to slow the fast-spreading virus. As if being forcibly shut down isn't bad enough, the lingering impact could be just as difficult to deal with, as people actively practice social distancing. Casinos are purpose-built to bring large numbers of people, often at-risk seniors, into close proximity to each other for long periods of time. Those are conditions in which the coronavirus has been proven to easily spread. MGM has faced rising costs, including for cleaning, and limited occupancy as it works to reopen for business. The U.S. fell into a recession in February and casinos are cyclical businesses, so there's very little going right for this industry at the moment.  

A woman at a slot machine

Image source: Getty Images.

That said, MGM Resorts' Mirage casino in Las Vegas is set to reopen today. Although things aren't nearly back to pre-COVID-19 levels, getting this prominent property back up and running is an important step in the normalization process. Investors were likely pleased by the news. However, MGM also announced that it had opened BetMGM operations in West Virginia. This is the company's online gambling effort, which allows it to serve gambling lovers while they sit safely in their own homes. Effectively, it is an additional revenue source that can help to offset the pain being felt at the casino operator's physical locations. This was likely another net positive for investors.   

Now what

MGM Resorts International is doing the best it can in a very bad situation. While reopening the Mirage and initiating online gambling in a single state aren't exactly huge steps forward, they are important ones. Investors are clearly focusing on the positives today.

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.

Stocks Mentioned

Mgm Resorts International Stock Quote
Mgm Resorts International
MGM
$36.53 (-1.30%) $0.48

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