MGM Analysts Divided on Stock as Executive Upheaval Continues

Posted on: May 2, 2020, 04:00h. 

Last updated on: May 3, 2020, 11:17h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

On Friday, a day after MGM Resorts International (NYSE:MGM) reported a first-quarter loss of 45 cents per share on a precipitous 29 percent drop in revenue, investors were treated to a nearly 11 percent slide in the stock price, division among Wall Street analysts, and more turnover among high-ranking executives.

MGM Resorts Upheaval
Excalibur is one of four MGM Strip venues where a president is reportedly being let go. (Image: YouTube)

The largest operator on the Las Vegas Strip is laying off Randy Morton of Bellagio, Cindy Kiser Murphey of New York-New York, Cliff Atkinson of Luxor, and Eric Fitzgerald of Excalibur, reports the Las Vegas Review-Journal, citing unidentified sources familiar with the matter.

On a conference call with analysts following the company’s Thursday afternoon earnings report, interim CEO Bill Hornbuckle noted Bellagio and New York-New York would likely be the first MGM Strip venues to reopen when Nevada allows gaming properties to get back to business.

The executive departures come after some analysts questioned how long it will take Las Vegas, MGM’s marquee domestic market, to recover following the COVID-19 pandemic.

Although we fully expect the North American gaming industry to recover from COVID-19, we expect the Strip to lag regional/convenience markets on the path to recovery,” said Stifel analyst Steven Wieczynski in a note provided to Casino.org. “Importantly, while we appreciate the fact that pent-up casino patron demand and a sizable drive-in business should provide some level of resiliency once the NV government authorizes Strip casinos to open, we expect the recovery in the higher-yielding group/convention business to require considerable time to fully recover.”

He has a “hold” rating on the stock, making him one of 13 of 22 analysts covering the name with a neutral view.

Lots of Executive Turnover

News of the executive departures from four of MGM’s Sin City properties is the latest in what is turning out to be a busy year on that front for the gaming company.

Earlier this year, former CEO Jim Murren said he was leaving before his contract was up, an exit that was sped up so he could join Nevada’s COVID-19 response task force. Murren was replaced by Hornbuckle in an interim capacity, with Paul Salem becoming chairman of the board.

Soon after Murren left, former Nevada Gov. Brian Sandoval exited as president of global gaming development to pursue the presidency at the University of Nevada, Reno (UNR).

Amid the latest round of executive shifts, there’s speculation that MGM’s corporate structure is changing and will eventually include a model where one president oversees multiple integrated resorts.

Good News: Strong Financial Footing

The first-quarter loss and executive turbulence could be red flags for investors over the near-term. But MGM is sporting one of strongest balance sheets in the industry, including $4.6 billion in cash at the domestic level.

“MGM’s financial health entered 2020 in its strongest position over the past 10 years, and we believe it has enough liquidity to remain a going concern, even with zero revenue through 2021,” said Morningstar analyst Dan Wasiolek.

He expects US gaming operations will bounce back to 2019 levels in 2023, with a more rapid rebound materializing in Macau and a resurgence emerging there next year.