Morgan Stanley Downgrades MGM Resorts (MGM) to Underweight

Morgan Stanley analyst Stephen Grambling downgraded MGM Resorts (NYSE: MGM) from Equalweight to Underweight with a price target of $33.00 (from $40.00).

The analyst comments: "We are downgrading the stock as we expect the following factors to drive downside to consensus estimates, which are unlikely to drive a positive valuation re-rating: 1) Vegas trends likely remain challenged post 1Q amidst a "reversion to the mean" on demand plus MGM will face a combination of disruption from renovations at Aria plus new supply from Hard Rock in 2027; 2) share loss in Macau as LVS ramps up investment in promotions/generosity; and 3) muted share trends in US OSB/iGaming. Just as importantly, the stock trades at an uncompelling unlevered FCF yield even excluding Japan capex (~$2.5bn over next three years). The combination of high fixed expenses and cash commitments in the years ahead combine to create downwardly skewed risk-reward. We tweak our estimates and price target to account for the latest trends along with our updated Macau market forecast. We see ~5% downside to our revised 12-month price target of $33 (vs. $40 before)."

For an analyst ratings summary and ratings history on MGM Resorts click here. For more ratings news on MGM Resorts click here.

Shares of MGM Resorts closed at $35.41 yesterday.

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