MGM Resorts International is an American-based global hospitality and entertainment company owning and operating 13 resorts and venues in Las Vegas, Massachusetts, Detroit, Mississippi, Maryland, and New Jersey, including Bellagio, Mandalay Bay, The Mirage, MGM Grand, and Park MGM. The company is headquartered in Las Vegas, Nevada. The MGM Grand is the company's most famous location, routinely hosting events such as UFC fights, Cirque du Soleil shows and music concerts while being one of the most well-known hotels and casinos in Vegas while offering state-of-the-art meetings and conference spaces, and an extensive array of restaurant, nightlife and retail offerings.
Additionally, the company also has business overseas in China with MGM China Holdings Limited (HKEx: 2282), a leading developer, owner and operator of gaming and lodging resorts in the Greater China region, specifically Macau. Aside from hospitality, The Company’s 50/50 venture, BetMGM, LLC, offers U.S. sports betting and online gaming through market-leading brands, including BetMGM and partypoker, while being the official sponsor of the NBA, WMBA, MLS, MLB and NHL. The company is currently pursuing targeted expansion in Asia through the integrated resort opportunity in Japan. The next few months will be interesting for MGM. As COVID restrictions start to lighten up and people start travelling again, MGM has the opportunity to capitalize on the collective cabin fever shared by people around the world, and in turn, go on a heavy bull run changing its horizontal trend. The question is, are you willing to bet on the house?
Fundamentals
With a hefty market cap of $20.93B (as of writing), MGM is one of the biggest players in the resort and entertainment space. The COVID-19 pandemic resulted in massive negative repercussions for multiple industries, with hospitality and entertainment arguably being hit the hardest. Nevertheless, MGM has beaten expected earnings in the past three quarters. However, it hasn’t all been good for the company through the pandemic as net income fell 26.41% in the trailing twelve months. Although the past year and a half have been tough, things are starting to look up for MGM, as total revenue in Q2 of this year is up 37.64% compared to Q1. Now, as things begin to reach a level of normalcy in North America, and people who have been stuck in their homes for the past year saving cash get ready to spend some of those vacation days, this could be an extremely profitable time for MGM and companies alike.
Technicals
MGM’s technicals match their fundamental thesis, showing that although COVID has been tough for the Vegas veteran, overall the price is rising. In the past 6 months (Figure 1), MGM’s stock has gone up and down like a toilet seat, with its upper bound being around $43 and the lower being around $37, with the average price increasing just under $0.50 over that time. Taking a look at the stock over a year-long period (Figure 2) however, tells a different story, increasing its floor price from $23 to $37. Taking a deeper dive looking at COGS, SRI and the P/E ratio shows that things are looking up for MGM (Figure 3). Increased COGS for the company indicates they are once again fillings up rooms and tables. The resistance indicator has also increased showing the stock is building momentum as things are starting to open again. The stock did hit and drop below its resistance from July 8th, 2021 to August 23rd, 2021, however, the price has rebounded since then showing that although the trade volume has decreased in recent months, investors still see promise. The most interesting metric has to be MGM’s P/E ratio. With a P/E upwards of 80 in the last months of 2019, and then rising up to 10 after a steep drop at the beginning of 2020, MGM is now trading with a -16.758 P/E ratio, indicating the company is criminally undervalued. Finally, for the value investors out there, year to date MGM is up 43.97% while the S&P 500 is up 21.42% indicating as the market recovers, industries that rely so heavily on consumer traffic, like that of which MGM operates, will and are charging back.
Figure 1 - 2h
Figure 2 - 1D
Figure 3 - 1D, Cost of goods, PE
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