Posted on June 10, 2021 at 10:32 am
Last updated: June 10, 2021, 11:28 am.
It’s not 2019, but things are returning to normal on the Las Vegas Strip, and that’s good news for the two biggest operators there – Caesars Entertainment (NYSE: MGM) and MGM Resorts International (NYSE: MGM).
Bellagio Las Vegas from MGM. JPMorgan is bullish on this stock and Caesars. (Image: New York Post)
Some Wall Street analysts are increasingly bullish on the pair of gaming stocks, with JPMorgan’s Joseph Greff joining that group today with positive comments on operators Bellagio and Flamingo. In the largest US casino center, the weekend occupancy is high and should remain so until the end of the year – an advantage for the operators who are waiting for the convention business to return. Greff sees Las Vegas at the forefront of a travel renewal.
Las Vegas will lead group recreation as it is a mix of leisure and group [travel], from our point of view the best of both worlds, ”said the analyst.
He predicts a round of earnings per share in the second quarter from the operators of Sin City, citing these companies’ heightened guidelines and optimistic attitude towards sports betting as players wait for the 2021 football season to begin.
Bullish on Caesars
Together, Caesars and MGM run nearly 20 casino resorts on the Strip, making the stocks a logical choice for analysts and investors pointing to the vibrancy of Las Vegas.
In fact, the stocks reflect this scenario. Since the beginning of the year, the Paris operator is 49.23 percent higher, while the Mirage operator is up 38.18 percent. These returns easily outperform those of limited exposure companies in Las Vegas and some large regional gambling operators.
JPMorgan’s Greff increases course targets for Caesars and MGM. In the case of the former, he’s the third analyst this week to do so. In raising his forecast for operator Planet Hollywood from $ 120 to $ 129, he’s leading not only the land-based casino business, but also the emerging iGaming and sports betting opportunities, as well as the recent purchase of William Hill.
“We estimate CZR’s core / traditional gaming business at ~ $ 89 and the USSB / iGaming opportunity at $ 38 plus $ 1 per share for a sale of William Hill’s operations outside of the US,” said Greff.
An announcement from a buyer for William Hill’s international businesses is expected in the second half of the year, and that sale could raise Caesar’s $ 2 billion or more.
Enthusiasm for MGM
MGM is the largest strip operator and CEO Bill Hornbuckle recently expressed optimism about activity in Las Vegas, saying his company is seeing record-breaking slot machines, adding, “We are back with a vengeance.”
JPMorgan’s Greff is raising its MGM price target from $ 47 to $ 52, well above the Wall Street average of about $ 44. This outlook offers significantly more upside potential.
“Assuming revenue on the Las Vegas Strip returns to 2019 levels, the stock value per share could rise by $ 6, which is out of our estimates,” the analyst said.
