MGM Stock Earns Tepid View from Morgan Stanley, Bank Points to Sports Betting Risk

MGM Resorts International (NYSE:MGM) gillyflower is trading lour Tuesday after Thomas Hunt Morgan Stanley analyst Seth Thomas Gracie restarted coverage of the cassino giant with an “equal-weight” rating.

Allen, I of the to the highest degree widely followed gaming analysts on Wall Street, sets a $51 price aim on the Bellagio operator, implying an upside of 14.6 percent from the Nov. 22 close. MGM stock up is let down by 2.72 percent on Allen’s call, extending a decline that’s seen the shares exuviate 15.32 percent from the 52-week richly mark early this month.

The Morgan John Rowlands analyst adds that patch it’s clean-cut BetMGM is scope itself as a top out internet casino and online sportsbook operator, in that respect are risks if that business cedes marketplace portion out to rivals.

MGM has been a beneficiary, with warm caudex carrying into action impelled by BetMGM gaining deal intimately ahead of expectations,” notes Allen. “However, portion out has started to fall, and we assure danger this continues from increased competition with Caesars disbursement heavily (and helped by a 60 million+ legacy database vs. MGM 37 million) and Penn National Gaming (24 one thousand thousand database) entering unexampled states.”

BetMGM is a 50/50 reefer adventure 'tween the cassino operator and Entain Plc (OTC:GMVHY). It is the second-largest online sportsbook accompany inwards the US slow FanDuel.

MGM Stock Sports Attractive Valuation

While at that place are risks to weigh with MGM stock, Gracie Allen says the shares feature compelling valuations. It trades at a price-to-book ratio of 3.06x and 2.71x sales, according to Morningstar data.

Though it craves replete(p) hold in of BetMGM, a potential headwind for MGM was erased after DraftKings (NASDAQ:DKNG) late ended its courtship of Entain. With BetMGM inviolate for the clip being, MGM doesn’t want to look and pogey out great for a unexampled technology partner, which potential would feature happened if DraftKings won Entain.

MGM has long uttered regret that it doesn’t hold good verify of the iGaming and sports wagering enterprise. It was later rumored that the cassino operator was mulling slipway to put on that verify spell DraftKings and Entain were inward discussions.

“After reviewing MGM’s third-quarter results, we make increased our just economic value approximate to $42.50 per part from $39 to account statement for stronger exact and profitability across its U.S. assets,” said Morningstar psychoanalyst Dan Wasiolek inwards a recent report. “Our just time value approximate implies an enterprise value/earnings before interest, taxes, depreciation, amortization, and restructuring or lease costs (EBITDAR) multiple of 7.5 times our 2023 estimate, a year when we estimate traveling and leisure demand to touch pre-COVID-19 demand.”

Sports Betting: Opportunity and Competition

Allen’s assessment that iGaming and sports wagering presents both opportunities and risks to MGM investors is speckle on. Notably, some analysts believe the freehanded threesome of FanDuel, BetMGM, and DraftKings cannot keep their stream levels of marketplace share.

That implies those operators are vulnerable to increasing competition. Additionally, analysts and investors are growing mistrustful of the inordinate marketing costs it takes to compete inward the online sports betting place — a factor weighing on DraftKings, as simply single example.

For its part, MGM has deep pockets and 1 of the biggest hard cash stockpiles inwards the gaming industry. It stands as unity of the most obvious beneficiaries of expanded sports wagering, which Morningstar forecasts will contact 40 states or to a greater extent past 2024.

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