MGM Resorts International (NYSE:MGM) is one of world’s largest gaming and entertainment companies with a massive global presence of 30 casinos and hotels. The company is currently navigating an unprecedented downturn in the sector due to the COVID-19 pandemic that killed the entire sector. The stock is currently trading at half its 2020 high after being down as much as 75%.
The company is facing massive losses due to little or no volume and high fixed costs of maintaining properties and operations. On Wednesday, MGM announced that it has suspended all entertainment events on it’s calendar till June as social distancing becomes a new norm globally.
In an interview with FOX5, MGM Resorts Chief Executive Officer Bill Hornbuckle stated that the industry has never faced anything like this and will have to adapt once lockdowns and travel bans are gradually relaxed. He stated that the company is installing thermal cameras and ENT devices at all locations to detect and isolate any cases if they arise as soon as possible.
In a preliminary earnings call last week, MGM management stated that it’s expects 30% loss of revenue to $2.3 billion, underperforming consensus estimates of $2.48 billion. The company expects revenues from Las Vegas to be down 21% to $1.1 billion and revenues from China to be down a steep 63% to $272 million (Yahoo Finance). The consensus estimate is that the company will lose $0.17 per share, compared to a $0.12 profit a year ago and total revenue estimates of $2.548 billion consolidated, down 19% (Nasdaq).
In Asia, MGM reopened it’s resorts on the the 20thof Feb, but travel restrictions and social distancing kept revenues low and the market expects the same to follow in the US. Analysts expect the next 3 months through the summer to be a write-off and expect an even harsher quarter in Q2. To prepare for this, the company has expressed it’s interest in raising $500 million of senior secured debt to mature over the next 5 years, in order to maintain sufficient liquidity. (TheStreet).
Overall, investors should be wary of the stock and wait till at-least mid next quarter to gauge the scenario as it seems the stock has room to go south further.