Why MGM Resorts International (MGM) is the Best Hotel Stock to Buy According to Analysts

MGM Resorts International (MGM) has been a standout performer in the hotel and gaming industry, with analysts consistently rating it as the best hotel stock to buy. The company's strong financial performance, robust market position, and positive outlook have contributed to this positive sentiment. In this article, we will explore the key factors that analysts consider when rating MGM and how these factors compare to other hotel stocks.

Financial Performance and Market Position

MGM's financial strength is evident in its exceptional net margin of 4.41%, which exceeds industry averages. The company's return on equity (ROE) of 5.72% and return on assets (ROA) of 0.44% also surpass industry standards, highlighting its effective use of capital and strong financial performance. Additionally, MGM's market capitalization places it above industry averages, emphasizing its significant scale and robust market position.

Revenue Growth and Debt Management

While MGM's revenue growth rate of 5.28% is lower than the average among peers in the Consumer Discretionary sector, it still indicates a notable increase in the company's top-line earnings. Although the company faces challenges in effectively managing its debt levels, with a high debt-to-equity ratio of 9.9, its strong financial performance and market position help mitigate these concerns.



Analyst Ratings and Price Targets

Analysts' price targets for MGM reflect their optimism about the company's future performance, with an average target of $50.86, a high estimate of $60.00, and a low estimate of $46.00. This current average represents a 1.93% decrease from the previous average price target of $51.86. The key drivers behind these targets include expansion and growth opportunities, digital gaming and sports betting, Macau and China operations, earnings growth and financial performance, and valuation metrics.

Comparative Analysis

Comparing MGM to other hotel stocks, analysts may consider the following factors:

1. Market Share: MGM's dominance on the Las Vegas Strip, with 35,000 guest rooms and suites representing about one fourth of all units in the market, gives it a significant advantage over competitors.
2. Diversification: MGM's operations span the Las Vegas Strip, regional US assets, and international markets, including Macau and Japan. This diversification helps the company weather economic downturns and capitalize on growth opportunities.
3. Online Gaming and Sports Betting: MGM's BetMGM platform, a joint venture with Entain, has shown strong growth and contributes to the company's overall revenue. This exposure to the growing online gaming and sports betting market sets MGM apart from traditional hotel stocks.
4. Expansion Plans: MGM's plans to open a resort in Japan in 2030 and its ongoing expansion in Macau and other markets position the company for future growth.

In conclusion, analysts rate MGM Resorts International (MGM) as the best hotel stock to buy based on its strong financial performance, robust market position, and positive outlook. The company's expansion plans, digital gaming and sports betting, and diversification across international markets contribute to its appeal. While MGM faces challenges in managing its debt levels, its strong financial performance and market position help mitigate these concerns. By considering these factors alongside their own analysis and risk tolerance, investors can make more informed decisions about whether to buy, sell, or hold shares of the company.