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MGM Stock Named Best Thematic Idea by Citi Analyst

Posted on: August 8, 2022, 03:32h.

Last update on: August 8, 2022, 03:32h.

Shares of MGM Resorts International (NYSE:MGM) have risen more than 16% in the past month, prompting some analysts to believe the stock is gaining momentum in the second half.

MGM
The iconic lion at the MGM Grand on the Las Vegas Strip. Citi says the MGM stock is a winning thematic idea. (Picture: Twitter)

In a report released today, Citi outlines its key thematic insights for the second half of 2022. The bank highlights stocks with leverage across various themes, including artificial intelligence, automation, business models based on the Internet, consumers in emerging markets, strong brand recognition and the net. zero exposure. MGM is one of 30 names on the list.

From there, we look under the hood of these baskets and provide a list of Citi Buy-rated stocks that have high/medium exposure to what we believe are the most attractive themes in the S&P 500,” strategist Scott wrote. Timer. “Stocks with negative expected earnings growth are removed, with the remaining stocks ranked by expected total return.”

MGM appears on Citi’s “Thematic 30” list due to its exposure to emerging consumers. In fact, the casino operator gets 65.5%, behind General Motors (NYSE: GM). Operator Bellagio is the only gambling capital on the list.

MGM can offset international risk

Citi’s call that MGM plays on emerging market consumer trends is credible, as the operator owns 56% of MGM China.

That means exposure to Macau, which has been a vexing proposition for casino operators this year amid China’s continued crackdown on COVID-19 cases. As such, MGM China is resisting major investment in the special administrative region (SAR) for the time being. Fortunately, more than other US-based companies operating there, MGM has outlets to offset China risk.

“Las Vegas Strip results were strong, and it appears demand and spending patterns showed no signs of slowing through July,” Stifel analyst Steven Wieczynski wrote in a recent note on MGM.

It rates the “hold” stock with a price target of $42. Operator Excalibur has the largest footprint on the Strip.

Other Favorable MGM Factors

While Citi has praised MGM as an emerging consumer game, the company also ticks the boxes for enviable brand recognition and some internet exposure through its BetMGM unit.

In fact, iGaming and online sports betting are a potential second-half catalyst for MGM shares in their own right. That could prove to be the case if the operator limits promotional spending throughout the football season and capitalizes on the recent legalization of sports betting in Massachusetts.

“Putting it all together, we believe management has painted a compelling strategic vision consisting of their asset optimization, online gaming and proposed integrated resort development initiatives,” concludes Wieczynski.