Las Vegas-headquartered MGM Resorts (MGM) operates in the hospitality and entertainment industries. It runs casino and hotel businesses around the world. The company has been selected to build and operate an integrated resort in Osaka, Japan.
MGM Resorts recently agreed to acquire the operations of The Cosmopolitan for $1.6 billion in a transaction that is expected to close in the first half of 2022. In another deal, MGM Resorts has taken full control of CityCenter after purchasing the remaining 50% stake in the business that it did not already own for $2.1 billion.
With this in mind, we used TipRanks to take a look at the latest financial performance and understand the newly added risk factors for MGM Resorts. (See Top Smart Score Stocks on TipRanks)
Q3 Financial Results
MGM Resorts reported revenue of $2.71 billion for Q3 2021, surpassing the consensus estimate of $2.48 billion. Revenue was $1.1 billion in the same quarter last year. The company posted adjusted EPS of $0.03 compared to a loss per share of $1.08 in the same quarter last year and beat the consensus estimate for a $0.01 loss per share.
MGM Resorts launched a $3 billion stock repurchase program in February 2020. It repurchased $687 million worth of shares during Q3 and had $2 billion remaining under the repurchase program at the end of the quarter.
The company ended Q3 with $5.6 billion in cash and $12.7 billion in debt. It plans to distribute a quarterly dividend of $0.0025 per share on December 15. (See MGM Resorts stock charts on TipRanks).
Risk Factors
According to the new TipRanks Risk Factors tool, MGM Resorts’ main risk category is Finance and Corporate, representing 30% of the total 40 risks identified for the stock. The company recently added one new risk factor under the Legal and Regulatory category, which accounts for 18% of its total risks.
In August 2021, VICI Properties (VICI) agreed to acquire MGM Resorts’ real-estate arm MGM Growth Properties (MGP) for $17.2 billion. The arrangement is expected to yield $4.4 billion in cash for MGM Resorts. While the parties are pushing to complete the transaction in the first half of 2022, MGM Resorts cautions that the deal could be delayed due to pending lawsuits. The company goes on to warn that defending itself against such lawsuits may be expensive and would also divert management’s attention such that its business could be adversely affected.
MGM Resorts has updated one of its Finance and Corporate category risk factors related to the pending VICI Properties and The Cosmopolitan transactions to highlight certain uncertainties in the deals. It reminds investors that even if it succeeds to complete the transactions, it may not achieve the anticipated benefits, which could unfavorably impact its earnings and stock price.
The Finance and Corporate risk factor’s sector average is 40% compared to MGM Resorts’ 30%. MGM Resorts’ stock price has gained about 22% since the beginning of 2021.
Analysts’ Take
Morgan Stanley analyst Thomas Allen recently initiated coverage of MGM Resorts stock with a Hold rating and a price target of $51. Allen’s price target suggests 33.16% upside potential.
The analyst noted that while the stock’s valuation looks attractive now, the company could face challenges in 2022, and sentiment on the stock could change. For example, MGM Resorts has recently been beating consensus estimates which have caused expectations to rise. That subjects the stock to near- or medium-term risks if MGM Resorts is unable to hold onto its share of the online sports betting market and earnings fall short of expectations.
Consensus among analysts is a Moderate Buy based on 4 Buys, 6 Holds, and 1 Sell. The average MGM Resorts price target of $53.99 implies 40.97% upside potential to current levels.
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