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Why MGM Resorts Stock Is Rolling This Week

By Howard Smith - Jun 25, 2021 at 12:57PM

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Vegas is back, and MGM has set its business up to be ready for it.

What happened

Casino owner MGM Resorts International (MGM 1.25%) may be better positioned coming out of the pandemic than it was going in. That's according to a Deutsche Bank analyst who upgraded the stock to buy this week. After that opinion was published, shares of MGM jumped 5% on Thursday's market open. That expanded the gains in the stock for the week, with shares up 7.4% as of 12:15 p.m. EDT Friday. 

So what

The stock had been marching higher even prior to the analyst upgrade this week. MGM was able to return its Las Vegas casinos gaming floors to 100% occupancy earlier than planned in May. MGM owns 13 resorts on the Las Vegas strip, and the stock is 39% higher year to date as the recovery from the pandemic has progressed. But the call by analyst Carlo Santarelli helped shares hit an intraday 52-week high on Thursday. 

Park MGM resort in Las Vegas at night.

Park MGM resort in Las Vegas. Image source: MGM Resorts International.

Now what

MGM operates regional casinos in the U.S. as well as having operations in China. But in the first quarter of 2020, when the pandemic impacts first started to hit, MGM had more net revenue from its Las Vegas Strip properties than its other regional and Chinese properties combined.

After a 55.2% drop in 2020, visitor volume in southern Nevada is expected to jump 57% this year and continue growing in the double digits next year, according to UNLV's Center for Business and Economic Research. As one of the largest casino owners on the Vegas Strip, MGM is expected to benefit handsomely. In addition, over the course of the pandemic, the company has grown its BetMGM joint venture online casino and sports betting app. 

Analyst Santarelli told clients that growth should continue, and on top of those gains, MGM's margins should improve thanks to efficiency and cost cuts made during the pandemic, as reported by CNBC.

Some investors feel MGM is still a good place to invest as tourism returns not only to Las Vegas, but also the other regional casinos and Macao in China. With an analyst chiming in this week, shares in the casino company are rolling.

Howard Smith owns shares of MGM Resorts International. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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