- Inventory battered this 12 months on Las Vegas, leverage issues
- Analyst praises MGM for New York choice, Ohio on line casino sale
- MGM inventory danger/reward favors the upside, he says
Down 5.21% 12 months thus far whereas the S&P 500 is greater by 14.5%, MGM Resorts Worldwide (NYSE: MGM) inventory is a transparent laggard, but it surely may shed that doubtful distinction in 2026.
MGM Grand on the Las Vegas Strip. An analyst set the inventory seems too good to disregard heading into 2026. (Picture: MGM Resorts Worldwide)
In a brand new report back to purchasers, Stifel analyst Steven Wieczynski acknowledges that shares of the Cosmopolitan operator have been pressured this 12 months by leverage issues and the slumping visitation on the Las Vegas Strip, the place MGM is the most important operator, however he provides the inventory could possibly be a 2026 breakout/rebound candidate.
We consider the setup for 2026 is overly enticing and consider the chance/reward at present buying and selling ranges is simply too compelling to move up, thus we consider traders ought to be revisiting the MGM story,” observes the analyst.
Wieczynski reiterated a “purchase” score on the on line casino fairness whereas trimming his worth goal to $47 from $50. His new worth goal implies upside of about 42% from the October 21 shut.
Market Has ‘Draconian Outlook’ on MGM Inventory
With the inventory buying and selling round 3x (excluding BetMGM and MGM China), estimated 2026 earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA), it’s truthful to say MGM’s valuation is depressed, maybe the results of market individuals assigning what Wieczynski describes as a “Draconian outlook” to the shares.
That ominous view is derived partly from fears round working leverage and that the gaming firm could also be too aggressive on the subject of capital allocation. The operator just lately allayed a few of these issues, stunning traders and the trade when it stated final week it’s bowing out of the New York Metropolis on line casino race.
MGM took one other step in the suitable course on October 16 when it introduced the sale of the working rights to MGM Northfield Park in Ohio to Clairvest Group for $546 million in money. That transaction will end in after-tax proceeds of $420 million whereas decreasing the vendor’s long-term lease obligations to landlord VICI Properties (NYSE: VICI). Wieczynski praised each choices.
“We 100% agree with this choice (New York) as we by no means noticed a path to an honest return on the ~$2.3 billion MGM was going to put money into that market given the absurd tax price and aggressive competitors (and that’s even earlier than NJ does something),” provides the analyst.
Relating to the divestment of the Ohio on line casino, Wieczynski factors out that given the phrases of that deal (a 6.5x a number of), the implication is that MGM inventory is price $57 and acts as “an indication that MGM’s administration workforce has hopefully discovered some capex faith.”
MGM Nonetheless Must Be Prudent
Whereas MGM inventory is affordable and the operator is producing money by promoting Northfield Park and saving capital by not pursuing a New York Metropolis license, the corporate nonetheless must train prudence. Stated one other means, traders seemingly don’t need to see splashy acquisitions, however fairly a concentrate on development alternatives corresponding to Japan, Macau, and high-end regional casinos.
“Our worry can be MGM now goes and does one thing irrational (like shopping for the remaining BetMGM stake or shopping for all of Entain), however we view the chance of one thing like that as very low proper now given the very fact we consider MGM’s administration totally understands leverage discount is/ought to be their prime precedence,” concludes the Stifel analyst.
