Will MGM Resorts Rise To The Top Of The Casino Food Chain?

Key Points

• MGM has been profitable during the post-pandemic reopening, as LVS, and WYNN are still bleeding
• BetMGM will be in the black in 2023
• Macau will be open to China tour groups by November
• Mainland travelers make up to 90% of the total spending in Macau
• While WYNN and LVS have the most to gain from Macau, MGM still commands a 10% market share

Casino operator MGM Resorts (NYSE:MGM) has been profitable during the post-pandemic recovery faring much better than leading rival casinos Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN), Melco Resorts & Entertainment Ltd (NASDAQ:MLCO).

Ironically, its shares are down (-25%), lagging Las Vegas Sands stock trading up 10% on the year. Las Vegas is back, and MGM benefits from the recovery while being least exposed to the COVID shutdowns in Macau, like its competitors Wynn and Las Vegas Sands. Las Vegas hotel occupancy rates are back to 90% as the Company has only been able to fill around 2,000 of the 5,000 job openings.

Its mobile and online sportsbook and gaming app BetMGM continues to gain market share against competitors, including DraftKings (NASDAQ:DKNG) and Penn Entertainment. BetMGM partnered with NBC Sports for the Sunday Night Football show, where it will be featured throughout the show highlighting stories and betting odds. The bottom line is this leaves more upside in shares of MGM.

Macau Lifting Restrictions Lifts Casino Stocks

China has signaled the reopening of Macau to tour groups from its zero-tolerance COVID-19 policy. Regulators have signaled the resumption of Mainland tour groups and issuing of IVS eVisas to Macau aimed at boosting the economy on the island.

Macau derives nearly 90% of its revenues from the 27.9 million Mainland travelers, and the easing of restrictions is expected to be in place by November. Casino stocks with a heavy concentration in Macau spiked in the past two weeks pushing shares of LVS well into the green. MGM still owns a 10% market share and derives 7% of its total revenues from Macau, so a recovery bodes well for MGM.

Vegas is Back, Baby

On Aug. 3, 2022, MGM reported its Q2 2022 earnings for the quarter that ended in June 2022. The Company reported an earnings-per-share profit of $0.03, missing consensus analyst estimates for a profit of $0.33, a (-$0.30) miss. Revenues rose 44% year-over-year (YoY) to $3.26 billion, beating analyst estimates of $3.03 billion.

Consolidated adjusted EBITDAR of $920 million and consolidated adjusted EBITDAR margin of 28.2% in the current quarter. The Company acquired The Cosmopolitan of Las Vegas and sold the operations of Gold Strike Tunica for $450 million. Same-store sales rose nearly 60% YoY. The Company bought back $1.1 billion of common shares, or 8% of outstanding shares. MGM is pursuing gaming licenses in New York and developing an Integrated Resort in Osaka, Japan.

MGM Resorts Chart

Here’s What the Charts Say

The rifle charts on the weekly and daily frames enable a clear view of MGM stock price action. The weekly rifle chart formed an inverse pup breakdown after rejecting the $44.31 Fibonacci (fib) level to drop and bottom near the $26.64 fib. The weekly rifle chart is in a make-or-break pattern with a flat weekly 5-period moving average (MA) at $32.34 and a weekly 15-period MA at $32.36. The weekly 200-period MA sits at $31.55.

The weekly stochastic drop stalled at the 60-band for a mini inverse pup or a cross backup. The weekly market structure low (MSL) buy trigger is a support at the $31.83 level. The weekly lower Bollinger Bands (BBs) sit at $26.17, and upper BBs overlap with the weekly 50-period MA at the $38.51 fib.

The daily rifle chart attempts a breakout with a rising 5-period MA at $32.06, crossing up through the 15-period MA at $31.77. The daily stochastic bounced to the 50-band. The daily 50-period MA is being tested at $33.45. The daily 200-period MA falls at $37.31 under the daily upper BBs at $37.78. Attractive pullback levels sit at the $30.70, $29.64 fib, $27.99 fib, $26.64 fib, $25.51, and the $24.53 fib level.

Upbeat CEO Comments

MGM CEO Bill Hornbuckle commented,

"Our second quarter results were outstanding, representing the best ever Adjusted Property EBITDAR quarter at the Company's Las Vegas Strip Resorts and best second quarter Adjusted Property EBITDAR at our Regional Operations driven by consistent strong demand from the leisure consumer and a return from our convention customer.

We look to the future with optimism, as our convention and event calendar for the next year remain notably strong and BetMGM continues to be a market leader with a roadmap for growth. We remain focused on achieving our vision to be the world's premier gaming entertainment company."

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