shares were lower on Monday following a downgrade from Goldman Sachs, which warns that bulls are making a bad bet when it comes to the casino operator.
Analyst Stephen Grambling cut his rating on MGM (ticker MGM) to Sell from Hold, although he raised his price target by $3, to $20, to account for his updated estimates across the gaming sector. He is concerned about a slower recovery for Las Vegas, “which will drive downside to consensus estimates and fundamental underperformance relative to peers” and likely weigh on the stock’s multiple.
MGM stock is down nearly 32% year to date, but the shares have rallied some 44% since the beginning of last month, ahead of peers and the
Grambling calls the rally unwarranted, give that MGM has lower exposure to regional gambling hubs—which have been outperforming as many people eschew air travel during the pandemic—and is more leveraged to group travel and conventions, which he thinks will be slow to recover. He has Buy ratings on regional players such as
Penn National Gaming
Red Rock Resorts
Grambling also notes that Covid-19 case counts around MGM’s properties have been high in recent weeks, “thereby increasing the likelihood of incremental restrictions.”
All of this leads him to believe that MGM won’t be able to meet consensus estimates in the coming quarters.
MGM didn’t immediately respond to a request for comment.
Casino operators have struggled this year because of the pandemic. Even reopened locations often have restrictions in place and many gamblers have simply decided to stay home. MGM’s year-to-date decline puts it in the middle of the pack, with
(WYNN) down about 40%, and
Las Vegas Sands
(LVS) down 24%.
That said, online gambling has been one bright spot in the industry, with some hoping MGM will be able to benefit from this new area as well.
MGM stock was up 1.3% to $23.02 Monday morning, in line with the gains in the
Dow Jones Industrial Average.
Write to Teresa Rivas at [email protected]