Why MGM Resorts International (NYSE: MGM) Stock Is Under Pressure

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MGM Resorts International (NYSE: MGM) stock lost over 3.2% on 16th September, 2020 (as of  12:25 pm GMT-4 ; Source: Google finance) as analysts from ROTH Capital downgraded the stock to “Neutral” From “Buy” rating. Despite a “V” shaped recovery in stock, the ongoing rise in coronavirus cases is hurting the stock sentiment. The stock is currently trading at $23.08, against the Roth analyst who assigned a sum-of-the-parts valuation of $19 to MGM.

Roth Analyst David Bain, sees that “Given a decoupling of real-estate holdings, MGM has become a more volatile equity vehicle, highly levered to the Las Vegas Strip. The cyclical, competitive, capital intensive nature of the Strip combines with a basket of well-known macro/specific travel and Las Vegas negatives, seemingly dismissed by investors since IAC took a 12% stake in MGM”. He also added that Macau concession renewal and other risks are heightened for U.S. operators in the current environment.

Second quarter of 2020 performance, has been disappointing for the firm, with consolidated net revenues falling 91% from the prior year quarter to $290 million, due to COVID crisis closures. Accordingly, consolidated operating loss was $1.0 billion from $371 million in the prior year quarter. Net loss attributable to MGM Resorts was $857 million from $43 million in the prior year quarter. Diluted loss per share of $1.67 in the current quarter from $0.08 in the prior year quarter. Adjusted EPS was a loss per share of $1.52 from $0.23 in the prior year quarter while Consolidated Adjusted EBITDAR loss was $492 million from Adjusted EBITDAR of $764 million in the prior year quarter.

On the other side, Park MGM and NoMad Las Vegas are opening by September 30, finishing the reopening of all of the group’s properties around the world following closures earlier this year amid the Covid-19 crisis. Upon reopening, Park MGM/NoMad would be The Strip’s first fully smoke-free casino resort. BetMGM and GVC Holdings are launching BetMGM Casino in West Virginia with is the widest range of online casino games currently available in the Mountain State.

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