Introduction to MGM Resorts
MGM Resorts CEO Bill Hornbuckle is maintaining a steady focus on the company’s future, despite the stock slumping in response to Las Vegas tourism woes and the withdrawal of the New York bid. Hornbuckle believes that MGM Resorts is taking a disciplined approach to capital allocation, with an eye on positioning the company for the future. This approach was evident in the company’s decision to withdraw from the New York casino bidding war, which was seen as a surprise move by many industry insiders.
Softness in Vegas Drags MGM Earnings
The softness in Las Vegas has been a major contributor to the decline in MGM’s earnings. The company’s revenue on the Strip fell to $2 billion, down from $2.1 billion in the year-ago quarter. This decline was attributed to a room remodeling program at the MGM Grand, as well as a decline in food and beverage revenues, lower table hold, and lower revenue per available room (RevPAR). The segment’s Adjusted EBITDAR fell to $601 million, compared with $731 million in the same quarter in 2024.
MGM Q3 by the Numbers
Some key numbers from MGM’s Q3 earnings report include:
- Revenue on the Strip: $2 billion, down from $2.1 billion in the year-ago quarter
- Adjusted EBITDAR: $601 million, down from $731 million in the same quarter in 2024
- Table win percentage on the Strip: 22.6%, down from 23.7% in the third quarter of 2024
- Business interruption proceeds: decreased by $14 million
- General liability and workers’ compensation insurance expense: increased by $13 million
A New York State of Mind No More
MGM’s decision to withdraw from the New York casino bidding war was a surprise move, but according to Hornbuckle, it was due to the newly issued state guidance on the duration of the license. The policy gave the New York Gaming Facility Location Board the latitude to award a bidder with a 15-year license rather than the 30-year version MGM originally expected. This change, combined with the proposed tax rate, made the investment less attractive to MGM.
Company Moves on to Japan Project
MGM is now turning its focus to its MGM Osaka resort, which is projected to open in 2030. The $8.9 billion project has been a hot topic, and MGM has entered into a USD $300 million denominated credit facility to support its funding. The facility has an interest rate of 2.5% and can be upsized to $450 million.
MGM Stock Moves After Earnings Report
MGM’s stock fell sharply by 8% to $28.70 per share in the after-hours session following the earnings report. However, the stock pared some of the losses the next day, trading near $31 a share. Despite the decline, several MGM executives view the stock as undervalued, and Hornbuckle pointed to BetMGM as a lever to unlock value.
Analysts’ Views
Analysts such as Barry Jonas and Chad Beynon have lowered their price targets on MGM, but still see room for material upside. Jonas lowered his price target to $47 per share, while Beynon reiterated an “outperform” rating on MGM, citing its balance-sheet strength.
Conclusion
In conclusion, MGM Resorts is facing challenges in Las Vegas, but the company is taking a disciplined approach to capital allocation and is focused on positioning itself for the future. The withdrawal from the New York bid and the focus on the Japan project are examples of this approach. While the stock has declined, several executives and analysts see it as undervalued and expect it to bounce back. With its diversification and balance-sheet strength, MGM is well-positioned to navigate the current challenges and come out stronger in the future.
