Is MGM Resorts a Good Investment?

PHOTO CREDIT: MGM Resorts

OVERVIEW

MGM Resorts International is a company based in the United States. The company owns and operates a chain of luxury hotels and casinos around the world. The company operates hotels and casinos in places like Las Vegas, China, and other parts of the United States and the world. The company was founded in 1986.

Why You Should?

  1. MGM Resorts is a good reopening play in an investor’s portfolio. The company saw a drop in demand and bookings because people stayed indoors and as governments shut down the businesses like resorts. However, once the pandemic is over, the company will see a rise in bookings as people go out to travel again.
  2. MGM will benefit from pent-up demand for leisure travel. The company owns and operates hotels and casinos in areas with a high demand for leisure travel. As people go out to travel to places like Las Vegas once again, the company will see a rise in current and future bookings and will also see higher sales of products in hotels and casinos.

Why You Should Not?

  1. The company faces tough competition in the hotel and casino industry. Some of these competitors include Las Vegas Sands, Wynn, and Caesars. This competition might hurt the company and its investors.
  2. The COVID-19 pandemic negatively impacted the company in the financial year of 2020 and continues to hurt the company’s sales. This is because many countries like China have shut down resorts and casinos as COVID-19 surges once again due to new variants. This will hurt the company until the pandemic is over for every country.
  3. New COVID variants will continue to add risk to investing in MGM Resorts. At the moment, vaccines are extremely effective in protecting people against the virus. However, unvaccinated people and people who have taken less effective vaccines are starting to drive another surge of COVID-19 around the world. This will hurt the company and its investors.
  4. Low vaccination rates in countries like China and parts of the United States will hurt the company as surges of COVID-19 risk the company having to limit or shut down operations once again. This will hurt the company and its investors.
  5. MGM Resorts also gets quite a bit of revenue from corporate and business travel. However, businesses and corporations have lowered their travel due to the pandemic and more efficient work-from-home workflows. This will hurt the company and its investors until business travel returns back to normal.

MY OPINION

In my opinion, MGM might not be the best investment in the short to mid-term due to tough competition as well as negative impacts and additional uncertainties/risks from the pandemic. However, the company is a great reopening play and will positively benefit from pent-up leisure travel demand.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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