MGM Resorts International: Why Buying The Stock Is Not Gambling Your Money Away

January 31, 2022 Earnings & Filings Industry Updates

MGM Resorts International (NYSE:MGM) has sold MGM Growth Properties LLC (NYSE:MGP), the company collecting rent on MGM’s buildings, to VICI Properties Inc (NYSE:VICI). Through this sale, the company has solidified $11.6 billion (i.e., liquidity for its domestic operations). MGM began expanding its portfolio, leaving it with more properties than ever before — increasing at a compound annual growth rate of 1.84% since 2012. With the gross profit increasing about 8.44% in any given year, excluding 2020, we can observe that the property acquisitions are a safe bet for the company’s continued growth. MGM has already acquired the Cosmopolitan for $1.625 billion and the remaining 50% share of CityCenter for $2.125 billion. In the case of the planned Casino in Osaka, it is essential to note that Japan has only 26 casinos operating with licenses. Additionally, MGM’s planned resort will be the region’s first casino. As MGM continues expanding its property portfolio, it will acquire more sources of revenue, ultimately enlarging its value.

MGM’s management has stated its mission to “be an industry leader in iGaming.” In 2018, MGM launched BetMGM — a 50/50 venture for online betting applications. BetMGM is currently available in 16 states and the District of Columbia. As more consumers are now staying indoors, this emphasis on online gaming is essential for the casino segment. MGM’s iGaming focus is necessary and will account for a more significant portion of the company’s revenues. This will be achieved as states’ legalization of sports betting continues.

MGM’s plans for expansion, both physically and virtually, will generate an increase in free cash flow that will ultimately benefit shareholders. I believe there is potential upside for the company as it is in a more solid position for expansion other players in the field.