MGM Resorts (MGM) Rises on Analyst Upgrade; Risk/Reward is 'Favorable'
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Price: $14.93 -0.99%
Rating Summary:
14 Buy, 13 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
Rating Summary:
14 Buy, 13 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
Trade MGM Now!
Shares of MGM Resorts (NYSE: MGM) rose modestly Tuesday as the company picked up another bull.
Morgan Stanley lifted its rating on the casino operator from Equal Weigh to Overweight with a $15 price target, suggesting 38% upside.
"We expect improving leisure trends in Las Vegas that have lagged other consumer sectors' recoveries and high incremental EBITDA flow-through to drive EBITDA momentum. MGM's ability to dividend cash from Macau should mitigate recent B/S concern", analyst Mark Strawn stated.
Following the recent sell-off, MGM's risk/reward is more favorable, the analyst argues. With Macau top line trends remaining strong, downside is limited to $8-$9 per share.
The firm also said they believe 8-10% growth in room rates (+5% leisure) should be achievable through 4Q11, despite macro concerns.
Morgan Stanley forecasts 15% EBITDA CAGR in LV through 2013 on 5% topline growth. Their base case of 2012 LV EBITDA estimate of $1.25 bn assumes 6% RevPAR growth and 5% growth in spend-per-occupied-room, generally below the mid-2000s up-cycle.
Concerns about MGM's liquidity are "overdone," according to the firm. "We believe MGM can maintain a $500-mn liquidity cushion through 2013 even in a Bear-Case scenario."
Shares of MGM closed up 1.4% to $11.03 on Tuesday.
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Morgan Stanley lifted its rating on the casino operator from Equal Weigh to Overweight with a $15 price target, suggesting 38% upside.
"We expect improving leisure trends in Las Vegas that have lagged other consumer sectors' recoveries and high incremental EBITDA flow-through to drive EBITDA momentum. MGM's ability to dividend cash from Macau should mitigate recent B/S concern", analyst Mark Strawn stated.
Following the recent sell-off, MGM's risk/reward is more favorable, the analyst argues. With Macau top line trends remaining strong, downside is limited to $8-$9 per share.
The firm also said they believe 8-10% growth in room rates (+5% leisure) should be achievable through 4Q11, despite macro concerns.
Morgan Stanley forecasts 15% EBITDA CAGR in LV through 2013 on 5% topline growth. Their base case of 2012 LV EBITDA estimate of $1.25 bn assumes 6% RevPAR growth and 5% growth in spend-per-occupied-room, generally below the mid-2000s up-cycle.
Concerns about MGM's liquidity are "overdone," according to the firm. "We believe MGM can maintain a $500-mn liquidity cushion through 2013 even in a Bear-Case scenario."
Shares of MGM closed up 1.4% to $11.03 on Tuesday.
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