On Tuesday, BofA Securities adjusted its price target for Melco Resorts & Entertainment Limited (NASDAQ:MLCO) shares, reducing it to $7.20 from the previous $7.50, while maintaining a Buy rating on the stock.
The firm's analysis suggests that the company's recent share repurchase activity should bolster its valuation. Melco announced the acquisition of 8.3 million American Depositary Shares (ADSs), which equates to 1.9% of the total outstanding shares, for a total cost of $44.5 million.
The share repurchase is part of a program that began on June 3, 2024, allowing the company to buy back up to $500 million worth of its shares over a three-year period.
As of the end of the first half of 2024, Melco reported having $545 million in cash, excluding funds from its operations in the Philippines and Cyprus, and restricted cash that serves as collateral to the government.
The buyback scale exceeded initial expectations and is anticipated to support the stock's valuation. The firm's valuation metric points to an 8x FY25 Enterprise Value/EBITDA, which is more than one standard deviation below the historical average. The analyst from BofA Securities reaffirmed the Buy rating, signaling confidence in the stock's potential performance.
In other recent news, Melco Resorts & Entertainment Limited reported its second-quarter results and strategic initiatives. The company disclosed an adjusted property EBITDA of approximately $303 million, a significant indicator of its financial health.
Melco Resorts also announced Tim Kelly's appointment as the new Property President for City of Dreams Macau and the expected opening of City of Dreams Sri Lanka in the fourth quarter of 2024.
In terms of financial strategy, the company is focusing on debt reduction and potential share repurchases, reflecting an improved balance sheet post-pandemic.
Despite facing challenges such as weak retail sales in Macau and the phase-out of pogos in Manila, Melco Resorts remains confident about its future, backed by strong financial performance and a commitment to service excellence.
These recent developments come from the company's Q2 2024 earnings call and SEC filings, providing investors with valuable insights into Melco Resorts' current financial trajectory and strategic direction. As always, these facts are based on the company's reports and analysts' notes and are crucial for investors making informed decisions.
InvestingPro Insights
As investors digest the latest price target adjustment for Melco Resorts & Entertainment Limited (NASDAQ:MLCO) by BofA Securities, real-time data from InvestingPro provides additional context to the company's financial health and market performance. With a market capitalization of $2.44 billion, Melco's recent share repurchase activity reflects a strategic move to enhance shareholder value. Despite analysts not expecting profitability this year, the company has shown a remarkable revenue growth of 95.37% over the last twelve months as of Q2 2024. This growth is further underscored by a quarterly revenue increase of 22.33% in Q1 2024.
Two InvestingPro Tips highlight the stock's recent trajectory: Analysts forecast sales growth for Melco in the current year, yet they do not anticipate the company will be profitable within the same timeframe. Additionally, Melco's stock has experienced a notable decline over the past six months, with a 34.09% drop in price total return. This could potentially present a buying opportunity for long-term investors, especially considering the company's aggressive share buyback program.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, providing insights that could inform investment decisions. The current price, following the previous close, stands at $5.55, which is below the fair value estimates of analysts ($9.65) and InvestingPro ($7.15). This discrepancy may suggest room for potential upside, aligning with BofA Securities' continued Buy rating on the stock.
Investors interested in a comprehensive analysis of Melco Resorts & Entertainment Limited can explore more tips by visiting InvestingPro's dedicated page for the company at https://www.investing.com/pro/MLCO.
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