MGM Resorts (NYSE: MGM) makes up one of the big 3 of gambling and entertainment along with Las Vegas Sand and Wynn Resorts. As the coronavirus spread across the globe, the travel and entertainment sectors continue to suffer. As of Wednesday, the stock was trading about 62% down YTD at $12.68.
As an operator of massive sized resorts and casinos, the company is bearing the burden of huge payroll expenses and property maintenance charges whilst generating fractional revenues. The company’s Macau locations were shut for two weeks in early February and Vegas locations have been shut since Mid-March due to a state-enforced lockdown.
The company’s stock tanked after earnings for Q1 were worse than expected, mostly driven by a 60% decline in China revenues. The company reported revenues of $2.25 billion and a loss of $0.45 per share, way worse than estimates of $0.08 per share. After drawing on credit lines and a $750 million debt offering, the company had $4.6 billion in cash at the end of the quarter. The company also cut its dividend to just 1 cent a year (Yahoo Finance). Even though the company has strong liquidity, it’s near term prospects look bleak as revenues as are hugely dependent on air travel and hosting of large corporate or other events in Vegas (Seeking Alpha). At the earnings call, management stated that they had never faced a challenge bigger this virus and will have to adapt the business to new norms. MGM also announced new efforts to ensure guest and staff safety by the installation of thermal cameras and ENT/Temperature tests at all entrances.
Earlier this week, the company released a seven-point health and safety plan that will be in place at reopening in June. This includes the two listed above along with mandatory masks and PPE, minimum 6 feet distancing at tables and other public areas, use of plexiglass barriers, enhanced and frequent sanitation of crowded areas, more frequent ventilation of air, new protocols incident response and contactless check-in and menus. (Today)
Although the news of reopening is good news, the poor outlook of the sector keeps the stock in at decade lows. (Investor Place)
After a wonderful price increase (6.54%) on Thursday it is expected that MGM stock will have another run on Friday as After-hours MGM stock gained another 2%.