MGM Resorts (MGM) PT Lowered to $39 at UBS

UBS analyst Robin Farley lowered the price target on MGM Resorts (NYSE: MGM) to $39.00 (from $44.00) while maintaining a Neutral rating.

The analyst comments "MGM recently noted that Q3 in Vegas was shaping up to look a lot like Q2, but we take a closer look and see a worse underlying trend. MGM meant that Q3 could end up with a similar decline in EBITDA to the -9% Vegas decline seen in Q2, and that is after excluding the business interruption proceeds in Q3 of last year. But we note that Q2 decline had included some disruption from room renovations at the Grand property of about $20M, plus $20M of low hold, plus $20M of spend on a high end event that didn’t do well. Excluding those things, MGM saw a -2% decline in Vegas EBITDA in Q2, mostly from lower-end properties mid week business at Luxor and Excalibur. However, if we exclude the $25M in room renovation disruption at the Grand in Q3, the -9% decline that MGM suggests is actually a -5% decline in underlying EBITDA, so a worse trend than the -2% seen in Q2 when you take out the one-time factors. We believe that Q2 had seen a sequential downtick from April to June, with June very soft, and that softness continued in July. August may have been a little better than July but not by much. And similarly, Sept may improve a little from August, but also at a modest pace."

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