4 Reasons Why JPMorgan Upgraded MGM Resorts

MGM Resorts International MGM shares were trading higher Tuesday after the casino giant landed a high-profile Wall Street upgrade.

The MGM Analyst: JPMorgan analyst Joseph Greff upgraded MGM fromNeutral to Overweight and raised the price target from $45 to $47.

The MGM Takeaways: In the upgrade note, Greff listed four reasons he is now bullish on MGM:

• The stock’s pullback over the last month has created an attractive entry point.
• MGM’s casino businesses, particularly in Las Vegas, are gaining momentum.
• The company is establishing an impressive market share in the U.S. iCasino and sports betting markets via its BetMGM app.
• The stock’s current valuation doesn’t give the company much credit for its 50% stake in BetMGM, the analyst said. 

“For sports betting, for publicly reported GGR reports in April, we [estimate] BetMGM had 11%, 15%, and 22% market share in New Jersey, Indiana, and Michigan, respectively,” he said.

In iGaming, Greff said BetMGM has been the market leader up to this point, with nearly 40% share in Michigan and 30% in New Jersey.

JPMorgan is projecting 2022 Las Vegas strip revenue will recover to 5% below 2019 levels in 2022.

Greff said a return to 2019 levels in Las Vegas could add another $6 per share in value to MGM stock.

Greff said most of MGM’s share price weakness over the past month has likely been in sympathy for high-flying sports betting and iCasino pure-play Draftkings Inc DKNG, which is down 30.8% since the beginning of April.

Following the recent weakness, Greff said MGM’s valuation is attractive at an enterprise multiple of around 11.3 times JPMorgan’s 2022 EBITDA estimates.

Benzinga’s Take: MGM investors will now be watching to see what the company does with the cash it raised from its recent $400-million sale of its Springfield assets to its partner REIT.

In addition, investors will be monitoring the ongoing recovery in Las Vegas and regional U.S. casinos, as well as the continued rollout of U.S. online and sports gambling in the coming quarters.