By Karishma Vanjani
The hotel and casino operator MGM Resorts International posted strong revenue and earnings in the first quarter thanks to a surge of business in China. Analysts say the stock is undervalued and has room to rise.
Late Wednesday, MGM reported adjusted earnings of 74 cents for the three months ended March, ahead of the 56 cents expected by analysts surveyed by FactSet. Net revenue grew 13%, to $4.4 billion, beating the $4.24 billion consensus.
Management attributed the outperformance to demand at higher-end properties in Las Vegas and a recovery at MGM China, where revenue grew by 71% in the current quarter to $1.1 billion versus the prior year quarter. The company said it is still benefiting from last year's removal of restrictions on travel and entry linked to Covid-19.
"Given its momentum in Macau, we'd expect Consensus 2024 Macau property level EBITDA to move higher to our new $1.17 billion," wrote J.P. Morgan's Joseph Greff. The current Wall Street projection is that MGM's Macau properties will produce $1 billion in earnings before interest, taxes, depreciation, and amortization this year.
Greff reiterated an Overweight rating on the stock and raised his target for the price to $57 from $54. That implies a gain of 43% from the closing price on Wednesday.
MGM's stock was up 6.2% to $42.22 in premarket trading on Thursday.
Mizuho analyst Ben Chaiken wrote that investors aren't pricing the stock correctly, given the business's compelling fundamentals and the potential for free cash flow to improve from the current level of $377 million. He reiterated a Buy rating on the stock and raised his target for the price by a dollar to $62.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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(END) Dow Jones Newswires
May 02, 2024 08:59 ET (12:59 GMT)
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