MGM Investors on Roller Coaster Ride, Stock Among Most Volatile Since February Top

Posted on: April 22, 2020, 10:33h. 

Last updated on: April 22, 2020, 12:02h.

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

Like every other name in the gaming industry, MGM Resorts International (NYSE:MGM) stock is being punished as the coronavirus forced the closure of all domestic casinos. But there’s more to the story.

MGM Stock Punished
Data confirms that for MGM investors, it’s been anything but a smooth ride this year. (Image: Yahoo News)

Compounding MGM investor woes is the turbulence associated with the stock’s epic decline – one that’s seen the name shed nearly 58 percent of its value since the Feb. 19 broader market top. In fact, the Bellagio operator’s stock is among the most volatile US equities over that period.

Schaeffer’s Investment Research examined the returns and volatility profiles of stocks since the Feb. 19 S&P 500 high, discovering that as measured by standard deviation – a commonly used gauge of the breadth of a security’s price gyrations – MGM is one of the most turbulent names over the past two months.

Not surprisingly, travel stocks and oil stocks are most prominent; two sectors with the most uncertainty lately,” according to the research firm. “Stocks tend to fall fast and rise slowly, so it’s not surprising the entire list is comprised of big-time underperformers.”

Schaeffer’s notes that since Feb. 19, the S&P 500’s standard deviation is 4.6 percent, but MGM’s is more than double that at 11.5 percent.

Rough Stretch

MGM isn’t an exception in the gaming space. It’s part of a broader trend that’s seeing analysts and investors express concern over what is becoming an extended zero-revenue environment, operators’ cash positions, their ability to service debt, and what the industry is going to look like when the coronavirus situation fades.

Specific to the Mirage operator’s decline this year, negative catalysts include credit rating downgrades and related warnings, a scuttled share repurchase plan, multiple high-level executive departures, and, at various points throughout 2020, unusually high levels of short interest in the stock.

On Schaeffer’s list of the 20 most volatile S&P 500 members since Feb. 19, there are six travel and leisure names. But MGM is the only gaming stock in that group.

While the stock is subjecting investors to a bumpy ride, insiders, including board members and high-ranking executives, remain undeterred, having gobbled roughly $27 million worth of shares over the past several weeks.

Interesting Tidbits

Schaeffer’s also published a list of the best and worst-performing S&P 500 names since Feb. 19. Not surprisingly, no gaming stocks are on the positive list. But the group of the 16 worst offenders doesn’t include any casino operators or related companies either. Five of those 16 are travel and leisure companies – three cruise operators and two airlines.

The research firm also included groupings of most up and down trading days since Feb. 19, as ranked by percentages. No gaming firm made either list.

It’s important to note the Schaeffer’s research pertains only to S&P 500 members. The index weights companies by market value and, as such, just three gaming stocks – Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:MGM) and MGM – are part of the benchmark.

The trio combines for just 0.12% of the index’s weight.