MGM Stock Underappreciated, Could Soar 53 Percent, Says Credit Suisse
MGM Resorts International (NYSE:MGM) is the largest manipulator on the Las Vegas Strip, and the shares are upward 41 percent year-to-date. But ane psychoanalyst is making the example the stock up isn’t adequately appreciated.
In a note of hand to clients today, Credit Suisse psychoanalyst Benjamin Chaiken upgrades the Bellagio operator to “outperform” from “neutral,” with $68 cost target. That implies upside of to a greater extent than 53 percent from the Oct. 11 close. Chaiken’s call in is sparking an telling exchange inwards MGM stock, sending it higher by to a greater extent than VII percent on loudness that’s already more than two-bagger the daily average.
MGM is a consensus Neutral name, inward voice due to a ‘conglomerate discount,’ but we guess sentiment will improve. This should alter now that stage business is existence streamlined,” said Chaiken in the note. “Further, MGM will terminate upwardly with ~$9 one thousand million of cash, and put up either purchase backwards a material portion of its securities industry cap, or enthrone inward luxuriously maturation areas, such as sports betting.”
The analyst’s papal bull telephone call on the cassino monster comes as the accompany is weighing options regarding how to continue with its thriving BetMGM unit. DraftKings (NASDAQ:DKNG) is attempting to acquire Entain Plc (OTC:GMVHY), MGM’s partner in the BetMGM venture.
MGM Deserves Sir Thomas More Credit for Transformation
MGM is I of the pioneers of the asset-light strategy in the gaming industry, having significantly whittled its property holdings to get a leaner, cash-rich operating company. While those asset sales have got been taking station for deuce years, Credit Suisse’s Chaiken argues the inventory isn’t getting enough credit for the company’s transformation.
“MGM has gone through and through a transformation, latterly announcing quadruplet transactions, and we believe the market place is not giving total credit,” said the analyst.
The operator’s recent spate of deal-making includes purchasing the operating rights of the Cosmopolitan on the Strip for well-nigh $1.6 billion, getting the 50 percent of City Center it didn’t previously have and using that dealings to sell the existent land of Aria and Vdara to Blackstone for $$3.89 one million million and VICI Properties’ (NYSE:VICI) $17.2 billion all-stock acquisition of MGM Growth Properties (NYSE:MGP).
That takeover efficiently monetizes MGM’s $4.4 one thousand million stakes inwards the existent land investment funds trust (REIT), and the gaming troupe is getting a I percent interest in the unexampled VICI.
Those transactions piss MGM a “cleaner, to a greater extent simplified organization, with a more attractive chapiter structure,” said Chaiken.
Options for Cash, Limited Macau Impact
As Chaiken notes, MGM could buyback a significant chunk of its $21.57 billion inwards securities industry capitalisation with its $9 one thousand million in cash. But it’s unlikely the society testament spend all of that great on portion out repurchases.
Should DraftKings gain Entain and MGM is successful inward retaining BetMGM, the cassino keep company will demand a engineering partner for the online gaming unit, and it could win 1 with a portion of the cash stockpile/ But it remains to live seen if that testament live necessary.
As for the operator’s Macau exposure, which may appear to live a liability due to recent regulatory headwinds, Chaiken notes MGM Communist China accounts for just now $4 of MGM’s stock up price.