Deutsche Bank maintained a Buy rating on MGM Resorts (NYSE: MGM) with a price target of $26. Comments follow strong Q3 results and news it plans to create a REIT. Analyst Carlo Santarelli called Q3 results "tremendous" though they ere upstaged by the REIT announcement.

"This morning MGM announced plans to create a REIT to be named MGM Growth Properties. MGM will contribute the real estate from ten properties (excludes Bellagio and MGM Grand). The MGP IPO, for which an S-11 has been filed, is expected to be completed in the 1Q16. Given MGM’s trading multiple and financial leverage, we were unsure of the validity of a REIT structure for the Company. With limited details regarding the financials of the structure, we believe it is difficult to ascertain the equity value created by this announcement, however, if we conservatively assume 2 incremental turns on 50% of the ~$1.1 bn of 2016 EBITDA from the 10 property subset, we believe it is worth, at minimum, $2 per share of equity value," said Santarelli.

"While REIT headlines may take the majority of the attention today, the following aspects of the print were also noteworthy, and we believe, would have provided a catalyst for shares in the absence of the REIT news; 1) Strip margins accelerated 460 bps (125% flow through), albeit against an easier comp, but a very solid result nonetheless, 2) Strip RevPAR was up a robust 8%, largely rate driven, 3) Macau was better than feared, and 4) management delivered on its messaging to the Street around the REIT structure," added the analyst.

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 $21.76 yesterday.