MGM Resorts Surges in Q1

MGM Resorts International reported a strong first-quarter performance, with adjusted earnings of 74 cents per share, surpassing analysts' expectations of 56 cents per share. Net revenue grew up 13% to $4.4 billion, outpacing the consensus estimate of $4.24 billion.

Factors Driving Growth

Management attributed this outperformance to robust demand at high-end Las Vegas properties and a remarkable 71% revenue growth at MGM China, reaching $1.1 billion for the quarter. The company continues to benefit from eased travel restrictions related to COVID-19.

Analyst Assessments

According to J.P. Morgan's Joseph Greff, MGM's momentum in Macau is expected to drive property-level EBITDA higher, projecting $1.17 billion for 2024, up from the current Wall Street estimate of $1 billion. Greff reaffirmed an Overweight rating on the stock and raised the price target to $57 from $54, implying a significant 43% gain.

Mizuho analyst Ben Chaiken emphasized that investors are undervaluing MGM's stock considering its compelling fundamentals and potential for improved free cash flow, which currently stands at $377 million. Chaiken reiterated a Buy rating and raised the price target to $62.

Market Reaction

Following the earnings report and analysts' comments, MGM's stock surged 6.2% to $42.22 in premarket trading on Thursday.

Conclusion

Despite a strong Q1 performance and bullish analyst sentiments, MGM Resorts International continues to be undervalued according to market analysts, signaling potential growth opportunities for investors.