Bear of the Day: MGM Resorts International (MGM)

MGM Resorts International MGM stock has dropped 14% in the past year while the S&P 500 climbed 16%. The Las Vegas-based hotel and casino operator’s recent slide is part of much longer-term underperformance compared to the benchmark’s return, which might make investors turn elsewhere.

MGM Resorts fell short of our Q3 earnings estimate on October 29 and provided downbeat guidance that earns it a Zacks Rank #5 (Strong Sell).

Stay Away from Zacks Rank #5 (Strong Sell) MGM Stock?

MGM Resorts is a casino, resort, and live entertainment powerhouse and an icon of Las Vegas. MGM’s portfolio includes roughly 30 unique hotel and gaming destinations globally. On top of that, its 50/50 venture, BetMGM, LLC, offers sports betting and online gaming in North America through market-leading brands, including BetMGM and partypoker.

MGM Resorts grew its Q3 revenue by around 2% to $4.3 billion, boosted mostly by growth at MGM China. Meanwhile, it posted a net loss of $285 million in Q3 “due primarily to the pre-tax impacts of a non-cash goodwill impairment charge of $256 million related to the decision to withdraw the application for a commercial gaming license for Empire City (a planned New York casino) and approximately $93 million of other non-cash write-offs related to Empire City.”

Revenue fell about 7% at its resorts on the Las Vegas Strip. MGM Resorts also offered rough earnings guidance.

The company’s consensus FY25 earnings estimate is down 16% in the past two months, with its FY26 Zacks Consensus Estimate 26% lower. MGM’s recent negative EPS revisions earn the stock a Zacks Rank #5 (Strong Sell).  

CFO Jonathan Halkyard said in Q3 remarks that MGM is “seeing encouraging signs of stability in Las Vegas with the return of the group and convention season and the completion of the MGM Grand room remodel.”

The firm’s financial chief also said that its “focus on premium, market leading integrated resort operations drove the decision to sell the operations of MGM Northfield Park. The price reflects a solid multiple, which again demonstrates the value gap available in the MGM Resorts equity price.”

Some investors might want to put the casino giant on their watchlist for a potential turnaround. But MGM stock is up just 35% in the last 10 years even though the S&P 500 soared 240%. This might mean that investors should consider looking elsewhere for stocks to buy. 

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This article originally published on Zacks Investment Research (zacks.com).

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