MGM Resorts contemplates imposing charges at its establishments in 2025, according to analysis by an analyst.
MGM Resorts International is gearing up for a significant year in 2025, according to Deutsche Bank's latest analysis. The global financial services firm has outlined several key developments that are expected to shape MGM's future.
Resort Fees and Revenue
Deutsche Bank analyst Carlo Santarelli expects MGM's resort fees to increase year-over-year in 2025, adding approximately 2% to average daily room rates and revenue per room. This increase is estimated to generate an additional $70 million of high-flow-through incremental net revenue for the company.
Pipeline Spending and Expansion
In 2025, pipeline-related spending is likely to escalate relative to 2023 and 2024. This spending could be driven by potential projects such as the upgrade of facilities if MGM receives a full casino license at Empire Resorts.
Parking Fees and Cost Reduction
MGM has already raised parking fees by a low-double-digit year-over-year percentage. The company is also seeking to eliminate about $200 million of costs across the Strip and regional markets, aiming to improve its financial performance.
BetMGM and Regulatory Developments
Deutsche Bank expects MGM to improve disclosure around BetMGM in 2025, allowing investors to better compare the business to peers and monitor its health. The firm also believes that the BetMGM business could be a key driver for MGM Resorts International's shares in 2025 and may even consider consolidating the BetMGM business in the year.
Market Conditions and Competition
Looking ahead to 2025, market share is expected to continue to consolidate, and margins are likely to feel pressure from incremental operating expenses related to amenity additions. Net revenue growth on the Strip could be challenged, and cost elimination will be important to maintaining margin levels in the mid-30s.
Japan and New York Initiatives
Capital allocated toward the Japan initiative is expected to rise modestly in 2025, while spending around New York remains subject to the timing of the license awards.
Valuation and Price Target
Deutsche Bank has placed a $48 price target on MGM Resorts International shares, which have been trading in the low $30s to end 2024. This price target is based on a sum-of-the-parts approach, valuing MGM's domestic OpCo asset base, its domestic managed operations, and the royalty fees associated with MGM Macau at a blended multiple of 6.4x Deutsche Bank's 2025 adjusted EBITDAR estimate.
Outperformance and Future Dynamics
MGM China broadly outperformed peers from a gaming-revenue market-share and EBITDA-growth perspective throughout 2023 and into 2024. However, the trends of MGM China's outperformance have slowed in the second half of 2024. The search results do not provide information about which U.S. city Deutsche Bank expects to drive the stock price of MGM Resorts International in 2025.
Deutsche Bank also believes MGM is considering new revenue-generation strategies, such as tiered seating in restaurants, which could be high-margin, flow-through revenue channels. They also suggest that MGM Resorts International could make efforts to consolidate the BetMGM business in 2025.
In conclusion, MGM Resorts International is preparing for a transformative year in 2025, with potential increases in resort fees, increased pipeline spending, cost reduction efforts, and a focus on the BetMGM business. The company's performance will be influenced by market conditions, regulatory developments, and the success of its initiatives in Japan and New York.
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