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Why MGM Resorts Stock Is Up Today

By Lou Whiteman – Oct 12, 2021 at 12:26PM

Key Points

  • MGM was hit hard by the pandemic, but the company has come out of the downturn aggressively and has acquired new properties.
  • Credit Suisse is upgrading MGM and raising its price target, believing the market has not fully priced in the benefits of the recent dealmaking.

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One Wall Street analyst is bullish on the company's recent moves.

What happened

Shares of MGM Resorts International (MGM -2.52%) were trading up as much as 8% on Tuesday after the resort and casino operator was upgraded to outperform by a Wall Street analyst. MGM has a lot of moving parts right now, but the analyst believes the company is heading in the right direction.

So what

MGM and most other resort operators had a difficult time during the pandemic, but as business has returned, the company has gone on the offensive. It has announced four transactions in recent months, including a $1.6 billion deal to acquire the Cosmopolitan resort in Las Vegas from Blackstone.

Close up of a table at a casino.

Image source: Getty Images.

Credit Suisse Group analyst Benjamin Chaiken doesn't think the market is giving MGM enough credit for the "transformation" the business has accomplished, and he is upgrading the shares to outperform from neutral and raising his price target to $68 from $33. Chaiken calls MGM a cleaner, more simplified organization with an attractive capital structure, saying it is set up well to beat earnings expectations.

The Cosmopolitan is designed for millennials, and should be a nice complement to MGM's existing Las Vegas properties, including the Bellagio and the Aria, which are designed to cater to the 40 and older crowd.

Now what

It has been a wild ride for MGM investors in recent years. The stock lost nearly 80% of its value in the early days of the pandemic, but has rallied more than 300% from those lows and is now up more than 50% year to date. But even after that climb, it is still trading nearly 30% below Chaiken's target price.

If the analyst is right and MGM can turn its recent dealmaking into higher-than-expected earnings, the stock should have more room to run. Investors are betting on just that, sending the shares higher on Tuesday.

Lou Whiteman 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
$36.38 (-2.52%) $0.94

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