On Thursday, Susquehanna analyst Joseph Stauff upgraded shares of MGM Resorts International (NYSE:MGM), raising the stock's rating from Neutral to Positive and increasing the price target to $54 from $46. The upgrade follows MGM's first quarter results for 2024, which Stauff described as a modest beat. The analyst highlighted MGM's management call, noting their improved focus on the company's outlook.
During the earnings call, MGM Resorts' management outlined their plans to invest more capital into their Las Vegas assets, which represent approximately 80% of the company's stock value. They also discussed utilizing additional tools to optimize yields through a softer second quarter before leveraging investments and these tools to drive growth. This growth is anticipated to be supported by the sports calendar and favorable comparisons in the second half of the year, especially considering the impact of last year's cybersecurity incident.
Stauff expressed confidence that these strategies would lead to upward revisions in the company's estimates for 2024 and into 2025. He underscored the importance of the Las Vegas market to MGM's valuation and indicated that, with the current plans in place, there is now sufficient valuation support due to the significant value drivers in Las Vegas.
The analyst concluded that, although it may be an early assessment, the decision to board the MGM investment train is justified by a favorable risk/reward trade-off. The new price target of $54 reflects Stauff's higher projections for MGM Resorts and moderately higher multiples anticipated for the company's stock.
InvestingPro Insights
As MGM Resorts International (NYSE:MGM) navigates through its investment strategies and market challenges, real-time data from InvestingPro offers a glimpse into the company's financial health and stock performance. With a market capitalization of $12.6 billion and an adjusted P/E ratio standing at 19.44 for the last twelve months as of Q1 2024, MGM shows signs of a company with a substantial presence in its industry. The company's revenue has seen a healthy growth of 17.92% over the last twelve months, indicating a robust top-line performance.
InvestingPro Tips highlight that MGM has been proactive with share buybacks, a move that can signal confidence from management in the company's value. Additionally, the company's liquid assets surpass its short-term obligations, suggesting a strong liquidity position. Despite some analysts revising their earnings downwards and expectations of a net income drop this year, MGM remains profitable over the last twelve months and is predicted to maintain profitability this year. It's important to note that MGM does not pay a dividend, which could influence investment decisions for income-focused shareholders.
For readers looking to delve deeper into MGM's financials and stock performance, InvestingPro offers additional insights and tips. There are 7 more InvestingPro Tips available for MGM, which can be accessed by visiting https://www.investing.com/pro/MGM. To enhance your investing strategy with these expert insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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