Casino operator MGM Resorts (NYSE:MGM) has seen its stock fall sharply in recent weeks but is still outperforming its peers – Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN).
The diversified operator is the only of the big-three casinos that turned a profit in Q3 2021, according to its earnings report. Most importantly, it has the least exposure to the Macau gaming industry, which has come under regulatory scrutiny by the Chinese government in its effort to root out corruption. This makes MGM more of a hedge when its two largest competitors receive nearly half their revenues from Macau.
With gambling licenses coming up for renewal in 2022, the stakes are high for Macau casinos as the Chinese government is considering placing its agents in the casinos moving forward. Its BetMGM Igaming and sportsbook app is live in 16 markets, with 20 expected by the end of Q1 2022 and generating nearly $800 million in 2021 revenues alone. Prudent investors seeking the best of breed and least Macau exposed casino giant can watch for opportunistic pullbacks in shares of MGM Resorts.
Q3 FY 2021 Earnings Release
On Nov. 3, MGM reported its Q3 2021 earnings for the quarter that ended in September 2021. The company reported an earnings-per-share profit of $0.03, beating consensus analyst estimates for a loss of (-$0.02), a $0.05 beat. Revenues rose 140.5% year-over-year (YoY) to $2.71 billion, beating analyst estimates for $2.42 billion. The company bought back $1 billion of shares through September 2021.
MGM CEO Bill Hornbuckle commented:
“We delivered another strong quarter led by our domestic operations resulting in new historical Adjusted Property EBITDAR records for our Las Vegas Strip and U.S. regional segments. These results demonstrate the continued robust demand for our gaming entertainment offerings across the U.S. and the effectiveness of our operating model. The completion of our asset light strategy will allow us to simplify our corporate structure and bolster our liquidity. I am also excited about our long-term growth prospects, including: BetMGM, which continues to establish itself as a clear leader in U.S. sports betting and iGaming; our selection as Osaka’s partner to build and operate a large-scale integrated resort in Japan; and the announcement of our agreement to acquire the operations of The Cosmopolitan of Las Vegas. The company remains focused on achieving our vision to be the world’s premiere gaming entertainment company. Our strong liquidity position, coupled with our confidence in the long-term recovery of our core business, has allowed us to continue to focus on maximizing long-term shareholder value. To that end, we continued to repurchase our stock in the third quarter, reaching over $1 billion of share repurchases since beginning the program this year. As we navigate future uses of our capital, we will remain disciplined in maintaining a strong balance sheet, pursuing targeted growth opportunities, and returning cash to shareholders.”
Conference Call Takeaways
CEO Hornbuckle set the tone:
“We have reached a number of milestones in this regard. In August, we announced a transaction with VICI and MGP to redeem the majority of our operating partnership units and deconsolidate MGP within our financial reporting structure. In September, we acquired the other 50% interest in CityCenter, monetizing its underlying real estate and are now proud owners of 100% of its operations. In October, we monetized MGM Springfield underlying real estate as well. And these transactions grant us the financial flexibility to take foothold of front-footed actions to invest in our core business and maximize growth and pursue opportunities that align with our long-term vision. For example, this quarter, we announced an agreement to acquire the operations of the Cosmopolitan in Las Vegas, a high-quality result with enviable product offerings, strong brand awareness, and complementary customer base making it an ideal addition to our Las Vegas Strip portfolio. We also believe that the synergies we have identified are highly achievable. We have incredibly excited to welcome the Cosmopolitan team to the MGM Resorts family, pending the transaction closing next year. Now, I’ve mentioned in the past that we are happy with the amount of exposure we currently have in Las Vegas. As such, we’re currently in the early stages of a process to sell the operations of the Mirage. Doing so will allow us to maintain our existing Las Vegas exposure while focusing on the complementary in diverse nature of our offerings in our hometown.”
MGM Price Trajectories
Using the rifle charts on the weekly and daily times frames enable a precision view on the price action for MGM stock. The weekly rifle chart peaked at the $51.19 Fibonacci (fib) level before falling sharply to $38.11 before rebounding. The weekly breakdown has a falling 5-period moving average (MA) resistance at $42.56 followed by the 15-period MA at $44.44. The weekly stochastic is falling below the 40-band and weekly lower Bollinger Bands (BBs) sit near the $34.90 fib. The weekly market structure high (MSH) trigger a sell signal on the breakdown below $44.61.The weekly market structure low (MSL) buy triggered on the breakout through $39.25.
The daily rifle chart is attempting a breakout, but shares fell back under the 5-period MA at $42.29 and 15-period MA at $41.86. The daily stochastic has already extending through the 50-band on a mini pup. The daily upper BBs sit at $47.70 while lower BBs sit at $37.36.
Prudent investors can watch for opportunistic pullback levels at the $39.45 fib, $37.75 fib, $34.90 fib, $33.86 fib, $32.90 fib, and the $32.07 fib level. Upside trajectories range from the $51.19 fib up towards the $57.60 fib level.