The gaming tables at casino operator MGM Resorts International (MGM -0.34%) are getting crowded. That's because a clutch of institutional investors have recently placed chips on the company through investments in its stock. Let's take a brief look at who these players are and a longer one at what's likely piquing their interest in the company.
All in on the lion
No less than six entities have piled into MGM in recent months. According to data compiled in early July in Defense World, the half-dozen were the following:
| Investor | Shares Bought (Recent Quarter) | Increase Over Previous Quarter | Total Shares Now Owned | Total Value of Holding |
|---|---|---|---|---|
| Bryn Mawr Capital Mgmt. | 4,316 | N/A | 4,316 | $204,000 |
| Ameriprise Financial | 106,158 | 4% | 2,527,893 | $92,923,000 |
| Royal London Asset Mgmt. | 1,363 | 1% | 110,057 | $4,047,000 |
| Mercer Global Advisors | 24,319 | 10% | 267,173 | $9,821,000 |
| Old National Bancorp | N/A | N/A | N/A | $217,000 |
| Savoie Capital | N/A | N/A | N/A | $460,000 |
Source: Defense World. Chart by author.
Institutional investors are attracted to stocks with modest valuations, anchoring a company that is demonstrating success and has a bright future. We can check off those boxes with MGM, which delivered solid results in its first quarter of this year.
That was due in no small part to a 71% year-over-year revenue surge at its majority-owned MGM China, the company that operates its properties in that country's gambling enclave of Macao. After a long slump due to the coronavirus, Macao's recovery has gathered steam. Both Chinese and foreign visitors are flocking there to gamble, shop, eat, drink, and generally be entertained.
This, aided by solid performance in the company's higher-end Las Vegas properties, pushed MGM's revenue up by 13% to $4.4 billion. That figure was more than enough to top the average analyst estimate, as was the $0.74 per share in non-GAAP (adjusted and not meeting generally accepted accounting principles) income. The latter, by the way, was well above the $0.44 per share MGM posted in the same quarter of 2023.
Many pieces of the action
MGM is one of the better-positioned casino companies on the scene. It's an inescapable presence on the Las Vegas strip, even though in 2016, its Vegas properties were spun out into a real estate investment trust (REIT). (This, in turn, was acquired by Vici Properties not long ago.) MGM China has a strong grip on the surging Macao market, where those visitor numbers are sure to keep climbing.
One of the more exciting markets in this country is online and mobile betting, and MGM has a finger in this pie, too. Its BetMGM joint venture with U.K.-peer Entain is reaping the benefits of gaming's popularity. In February, Entain revealed that BetMGM's net revenue from operations in 2023 zoomed 36% higher year over year to nearly $2 billion. That's pretty good for a business that was launched less than six years ago.
This solid collection of assets should continue to improve MGM's fundamentals, and there's more to come. In mid-2023, Japanese authorities approved company plans to build a splashy, $10 billion resort in the country. That's a high price tag, but the potential in that relatively affluent market is juicy.
Collectively, analysts tracking the stock anticipate nearly 7% growth in revenue this year (to $17.2 billion) before settling down to a more modest improvement that will bring that line item to more than $17.4 billion in 2025. That script is flipped for per-share profitability. The consensus is that this will rise by 5% in this period (to $2.80) before popping 14% to $3.19 next year.
Finally, MGM is currently running a very aggressive stock-repurchase program. It bought 12 million of its own shares and retired them in the first quarter, spending $484 million. This is part of its mission to reduce its share count significantly. Since 2021, the company revealed, it has cut the number of shares by 36%.
As of the end of the quarter, MGM had $1.7 billion left in share repurchase authorization, so we can expect more spending on buybacks. This also tends to help boost the price of the remaining shares outstanding.
MGM is looking like a solid bet, so it's little wonder that institutions are piling in. They sense the growth potential of Macao (and further in the future, its Japanese resort), not to mention the bright promise of legalized gambling in the U.S. Investors should sense this, too, and seriously consider buying MGM stock to take advantage of it.
