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Why MGM Resorts International Stock Jumped 32% in February

By Reuben Gregg Brewer - Mar 3, 2021 at 8:34AM

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Gambling company MGM Resorts continued its push into the digital sphere and investors like what they are seeing.

What happened

Shares of casino operator MGM Resorts International (MGM -2.21%) rose an incredible 32% in February according to data from S&P Global Market Intelligence. There was a lot of news during the shortest month of the year, but the big story was earnings.

So what

In the fourth quarter of 2020 MGM Resorts' revenue fell roughly 50% year over year and it lost $0.90 per share. On the surface that's terrible, until you step back and consider that this drop was directly related to the global coronavirus pandemic. In fact, performance is improving. In the third quarter of 2020 the company's revenue was off by 66% and it lost $1.08 per share. So investors appear largely pleased with the direction the company's business is heading. Notably, after the earnings release, MGM Resorts said that increased interest in travel to Las Vegas was leading it to resume 24-hour operation at some of its key casinos in the city. That further bolsters the recovery story helping the stock along of late.  

A gambling table with dice and chips on it.

Image source: Getty Images.

However, there's another piece here that investors need to keep in mind. MGM Resorts hasn't been sitting around waiting for patrons to come back to its casinos, it has been actively reaching out to gamblers. That's been driven by online gaming, notably in the sports space. It opened online betting in a new state during the month of February and inked an online betting agreement with Topgolf. So the trends in the online betting and gaming space appear to be solidly on track for growth, too. This effort bolsters the turnaround story and has investors even more excited about MGM Resorts' long-term future.  

Now what

Shares of MGM Resorts are higher today than they were before the coronavirus pandemic hit. Although the business is clearly starting to recover from the impact of the pandemic, it seems like investors have priced in a huge amount of good news already. Most long-term investors, and particularly those with a conservative bent, should probably tread with caution here at this point.  

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