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MGM Resorts expected to see 'relative outperformance' in 2023

Published 12/05/2022, 09:58 AM
Updated 12/05/2022, 10:06 AM
© Reuters.  MGM Resorts (MGM) expected to see 'relative outperformance' in 2023
MGM
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By Sam Boughedda 

MGM Resorts (NYSE:MGM) has been upgraded to Buy from Hold, with its price target lifted to $50 from $40 per share by Truist analysts on Monday.

Jonas told investors in a research note that while the firm has historically been more cautious on bear-case macro risks to the strip and destination markets, they expect MGM to "see relative outperformance in 2023" on the strip's "strong event calendar and returning midweek business travel."

"While the macro presents some uncertainty into 2023 (similar to 2022), the event calendar could drive relative outperformance. CES (easy comps), Con/Agg (occurs once every 3 years), and the inaugural F1 should drive room rate compression (many days are already sold out) and sizable gaming/other non-gaming spend. We estimate these three large events alone could alone drive ~$70M of Y/Y EBITDA upside in 2023," wrote the analysts.

They added that Truist's leisure-based room survey shows strong year-over-year growth in Q4, with MGM rates up +42%/+27%/+66% for total/weekends/weekdays. Furthermore, preliminary January and February rates are up +38% and +31%, respectively.

"MGM could be better positioned in 2023 vs. 2008. During the Great Recession, Las Vegas experienced idiosyncratic conditions (incl. new supply, negative White House messaging), which we don't see today. We see macro headwinds offset by a solid event calendar, return of the midweek traveler, and a more diversified market/attractions," the analysts continued.

MGM shares jumped 3% in early Monday trading.

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