MGM Resorts International Sees Growth in Previously Untapped Markets

A Member of Pat McKeough’s Inner Circle recently asked for his advice on MGM Resorts International, the largest resort operator on the Las Vegas Strip.

Pat likes the company’s strategic initiatives which provide clear catalysts for continued expansion. However, he notes the company remains vulnerable to a weak economy and lower consumer confidence.

MGM Resorts International (Symbol MGM on New York; www.mgmresorts.com) is a global gaming and entertainment company. It has U.S. and international locations featuring hotels and casinos, meetings and conference spaces, live and theatrical entertainment experiences, and an array of restaurant, nightlife and retail offerings.

MGM operates 16 casino properties in the U.S. and, through its 56% controlling interest in MGM China Holdings Ltd., operates two casino properties in Macau.

The company’s 50/50 venture, BetMGM, offers U.S. sports betting and online gaming, while its LeoVegas AB subsidiary offers similar services in several jurisdictions throughout Europe. It also has a 50% ownership in Osaka IR KK, which is developing a resort in Osaka, Japan.

In July 2023, MGM teamed up with Marriott International to let members of the Marriott Bonvoy Loyalty program earn and redeem points at MGM Resorts properties. This licensing deal should continue to increase hotel stays at MGM Resorts.

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MGM reported revenue of $12.90 billion in 2019. Revenue then plunged in 2020 in the wake of the pandemic, down 60.0% to $5.16 billion. In 2021, revenue recovered considerably, rising 87.5% to $9.68 billion, as COVID-19 restrictions were eased. Revenue made another big gain in 2022—climbing 35.6% to $13.1 billion. In 2023, revenue rose 23.1% to $16.2 billion. Revenue then rose further in 2024, by 6.7% to $17.2 billion.

MGM reported earnings, excluding one-time items, of $0.77 a share in 2019. Earnings then plunged in 2020 to a loss of $3.94 a share, due primarily to the impact of COVID-19. In 2021, earnings rebounded, to a loss of $0.67 a share. That was followed by a loss of $2.74 a share in 2022 primarily due to an accounting adjustment for income taxes. In 2023, earnings jumped to $2.67 a share. Earnings then dropped 3.0% in 2024, to $2.59 a share.

MGM’s outlook going forward remains positive

Meanwhile, in the three months ended December 31, 2024, MGM’s revenue declined 0.7% to $4.35 billion from $4.38 billion. Las Vegas Strip Resorts reported revenues of $2.2 billion in the latest current quarter compared to $2.4 billion in the prior year quarter, a decrease of 6%. That was mainly because of a decrease in casino and room revenues due primarily to strong results from the inaugural Formula 1 race in the prior year. However, that decline was mostly offset by a record performance in Asia. MGM China saw an increase in casino revenue, which rose 4% to $885 million.

Excluding one-time items, the company’s per-share earnings fell 57.5%, to $0.45 a share, from $1.06.

MGM needs an expanding economy and rising consumer confidence to boost its revenue and profits going forward. Meanwhile, it faces rising costs—and its MGM China business entails political risk.

Still, the company’s outlook is positive. December 2024 was its highest convention-booking month on record, and in January 2025 it saw revenue growth in its Las Vegas Strip Resorts and Regional Operations as well as strong future bookings. The company’s digital businesses is growing as well, and its BetMGM venture in North America is expected to be profitable this year.

Recommendation in Pat’s Inner Circle: MGM Resorts International is okay to hold.

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