MGM Stock Extends Rally as Jefferies Issues ‘Buy’ Rating, Price Target Raised to $50

Posted on: March 15, 2021, 07:19h. 

Last updated on: March 15, 2021, 11:21h.

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

MGM Resorts International (NYSE:MGM) is extending its bull run Monday, after Jefferies analyst David Katz raised his rating on the stock to “buy” from “hold.”

MGM stock
MGM Grand Las Vegas. Analyst David Katz is bullish on MGM stock. (Image: KTNV)

The Katz call comes after the Mandalay Bay operator jumped almost five percent last week, boosting its year-to-date gain to nearly 24 percent. He cites familiar catalysts, such as increasing COVID-19 vaccinations and government stimulus, as underpinning the gaming name.

With forthcoming stimulus and further vaccine roll-out, we expect strong pent-up demand for leisure travel and particularly group travel,” said Katz in a note to clients.

He adds the Las Vegas recovery should “steepen” in the second half of this year, extending into the first half of 2022. If that forecast proves accurate, it’s pivotal for MGM stock, because the company is the largest operator on the Strip.

The Jefferies analyst also lifted his price forecast on the Mirage operator to $50 from $36, implying upside of 28 percent from the March 12 close. Katz’s new price target is well in excess of the Wall Street consensus of $35.69.

MGM Stock Seen Benefiting from Macro Improvement

Katz’s call on MGM comes as data confirms more Americans are getting coronavirus vaccines. That’s just days after some started receiving their share of the recently signed $1.9 trillion stimulus package, and as Nevada is increasing casino capacity ahead of the start of the NCAA Tournament – one of the most wagered-on events in the US and one that usually lures throngs of tourists to Las Vegas.

The Jefferies analyst’s comments on the Bellagio operator arrive after the Centers for Disease Control and Prevention (CDC) said last Friday vaccinations topped 100 million for the first time, and that 35 million people representing 13.5 percent of the US adult population are now fully vaccinated.

Further cementing the case for an ongoing rally by MGM stock is that air travel is perking up in a big way. Data from the Transportation Security Administration indicates 1.357 million people passed through US airports last Friday, the largest single-day total since March 2020. That’s a sign some travelers are returning to gaming destinations, including Las Vegas.

“While the valuation is complex, due to operating company and owned assets, partial stakes, and a combination of geographies, we expect shares to rerate on an improved macro and continued strength in execution,” said Katz.

BetMGM Catalyst

Owing to investors’ ongoing enthusiasm for iGaming and sports wagering games, it’s hard to discuss MGM stock these days without addressing BetMGM.

Katz says that unit is gaining momentum and recently jumped to fifth overall in Jefferies’ Digital Brand Matrix. The business is the third-largest online sports betting provider in the US behind FanDuel and DraftKings.

BetMGM is a joint venture between the casino operator and Entain Plc (OTC:GMVHY), meaning the two companies share the economics derived from the enterprise.