Is MGM Resorts International (MGM) a Top Hospitality Stock to Buy Now?

MGM Resorts International (MGM) has been making headlines with its impressive financial performance and strategic initiatives, raising the question: Is it one of the best hospitality stocks to buy now? Let's delve into the company's recent results, strategic moves, and competitive landscape to find out.



Record Financial Performance

MGM Resorts reported record full-year consolidated net revenues of $17.2 billion for 2024, a 7% increase from the previous year. This growth was driven by strong performance from MGM China, which achieved a record full-year Segment Adjusted EBITDAR of $1.1 billion, a 25% increase from the prior year. These numbers indicate that MGM is not only weathering the storm of post-pandemic recovery but also thriving in a competitive market.

Strategic Share Repurchases

One of the most notable moves by MGM Resorts is its aggressive share repurchase program. The company repurchased over 33 million shares in 2024, reducing shares outstanding by more than 40% since 2021. This move is expected to accelerate free cash flow per share generation, creating significant value for shareholders. As Jonathan Halkyard, CFO and Treasurer of MGM Resorts International, stated, "As we grow our core operations and realize returns from digital and development investments, this reduced share count will accelerate the free cash flow per share generation for our shareholders, creating significant value."

Robust Digital Growth

MGM's digital businesses, particularly BetMGM, are showing strong growth. BetMGM accelerated its revenue growth through 2024 and is expected to be profitable in 2025. This digital growth is crucial as it diversifies the company's revenue streams and positions it well for future growth in the digital gaming market, which has a significant $41 billion market opportunity.



Competitive Landscape

While MGM Resorts reported a revenue decrease of 0.66% in the fourth quarter of 2024, most of its competitors experienced an 11.41% increase in revenue during the same period. Despite this, MGM Resorts achieved a higher net margin of 5.47%, indicating better profitability compared to its competitors. This suggests that while MGM may face revenue challenges, its operational efficiency and cost management are superior, making it a strong investment option.

Market Capitalization and Valuation Metrics

As of the provided data, MGM Resorts International has a market capitalization of $8,972 million, which is lower compared to its competitors like Marriott International Inc ($67,711.735 million) and Hilton Worldwide Holdings Inc. However, MGM's strong financial performance and strategic initiatives position it well for future growth, potentially leading to an increase in market capitalization.

Conclusion

In summary, MGM Resorts International's record financial performance, strategic share repurchases, and robust digital growth make it a strong investment in the hospitality sector. While it faces competition, its operational efficiency and cost management set it apart, making it a compelling choice for investors. As the hospitality industry continues to recover from the pandemic, MGM Resorts is well-positioned to capitalize on the growing demand for both traditional and digital gaming experiences.