In a new report, analysts at Susquehanna updated their position on gaming companies MGM Resorts International MGM 0.19% and Wynn Resorts Ltd WYNN 2.11% following Las Vegas Sands Corp’s LVS 0.04% 1Q earnings miss. Analysts predict similar results from MGM and Wynn and lowered their near-term expectations for the companies.
Macau Outlook
Analysts are calling for a 20.1 percent decline in gross gaming revenue (GGR) in Macau in 2015 and a 10.5 percent increase in GGR in 2016. They note that Las Vegas Sands’ management commented during the company’s conference call that the environment in Macau has become increasingly competitive, resulting in lower margins and occupancy declines.
Vegas Outlook
Analysts point out that Las Vegas Strip gaming revenue declined 6.2 percent in January/February. They are predicting an overall 1Q15 total Strip gaming revenue increase of 4.0 percent and believe the relative strength in core gaming in Las Vegas so far this year coupled with weakness in baccarat will likely benefit MGM over Wynn.
Land & Buildings Proposal
Susquehanna analysts explain that Land & Buildings’ REIT conversion plan and proposed valuation of the opco/propco pairing is unrealistic. Land & Buildings suggested a $25 valuation for and MGM REIT alone and a $33 valuation for the opco/propco pairing.
Susquehanna values a theoretical MGM REIT at $12 per share and an MGM C-corp at $11 per share, for a total of $23 in value for the pair. Analysts note that these valuations are essentially meaningless because MGM management has rejected the proposed restructuring plan.
Price Targets
Susquehanna has a Positive rating on the stocks of MGM and Wynn. Analysts maintained their $26 price target for MGM, but lowered their target for Wynn from $189 to $159.
Read this article and all my other articles for free on Benzinga by clicking here
Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
