Barclays has reaffirmed its Overweight rating and $56.00 price target for MGM Resorts International (NYSE:MGM), ahead of the company's third-quarter earnings report.
The firm's analysis suggests that the gaming industry, particularly the digital segment, is positioned for robust performance in the quarter, bolstered by factors including the National Football League (NFL) season.
The report indicates that September's gaming handle, the total amount bet, showed a significant year-over-year increase of at least 15-20% when compared on a same-week basis. This growth is partly attributed to the NFL schedule, which added 15 more games this September compared to the previous year.
Additionally, the 'hold', or the percentage of wagers kept by the bookmaker, experienced a modest year-over-year increase. Promotional spending was also noted to be reasonable and lower than initially projected.
The positive September trends, combined with data from July and August, have led the firm to increase its earnings estimates. Third-quarter EBITDA, a measure of a company's overall financial performance, is expected to be strong across the board for digital gaming operators.
Specifically for MGM Resorts, the firm anticipates slightly better bottom-line results. However, the focus for MGM and Penn National Gaming (NASDAQ:PENN) is believed to be more on market share progress rather than immediate financial outcomes.
While adjustments have been made to the digital gaming forecasts, Barclays has left all land-based estimates unchanged as the industry prepares for its annual convention in Las Vegas scheduled for next week.
DraftKings (NASDAQ:DKNG) is expected to see the most favorable share price reactions in the third quarter, according to the report. Caesar's Entertainment (CZR) is also poised to report robust digital results, driven by iGaming strength and improved sports betting hold, though digital remains a smaller part of CZR's overall business. Flutter Entertainment (FLUT) is anticipated to deliver solid results, albeit against higher expectations following a strong second quarter and positive recent management discussions.
InvestingPro Insights
To complement Barclays' positive outlook on MGM Resorts International, recent data from InvestingPro provides additional context for investors. MGM's market capitalization stands at $12.05 billion, with a P/E ratio of 14.8, suggesting a relatively modest valuation compared to some peers in the gaming industry. The company's revenue growth of 15.12% over the last twelve months indicates strong performance, aligning with Barclays' expectations of robust industry trends.
InvestingPro Tips highlight that MGM's management has been aggressively buying back shares, which could signal confidence in the company's future prospects. This aligns with the positive outlook for the gaming industry mentioned in the article. Additionally, MGM boasts a high shareholder yield, potentially making it an attractive option for value-focused investors.
It's worth noting that while the company is profitable and analysts predict continued profitability this year, InvestingPro also points out that net income is expected to drop this year. This information adds nuance to the financial picture painted by Barclays' report.
For investors seeking a deeper dive into MGM's financials and prospects, InvestingPro offers 8 additional tips, providing a more comprehensive analysis of the company's position in the dynamic gaming market.
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