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MGM Resorts' (MGM) Springfield Casino Disappoints in December

Zacks Equity Research

MGM Resorts International’s MGM MGM Springfield posted dismal gross gambling revenues for December. The casino, which was opened in September 2018, recorded its lowest revenues in history.

In December 2019, MGM Springfield reported revenues of $18.9 million, down 12.5% from December 2018. Moreover, in November, the company reported revenues of $19.9 million, which were, then, the second-lowest revenues in history.

In August 2018, MGM Resorts had said that Springfield casino will generate $34.8 million in revenues, on average, per month. However, over the past 16 months, the average has been $21.54 million a month. MGM Springfield is facing stiff competition from casinos in New York and New Hampshire. Increased hotel openings and promotional activities have made these markets highly competitive.

Focus on Asset Light Strategy

Instead of being a capital intensive, brick-and-mortar real estate business, the company intends to be a developer, manager and operator of major gaming, hospitality and entertainment properties. The company stated that it wants to focus on sports and live entertainment.

Of late, the company is focusing on the asset light strategy. Recently, MGM Resorts announced that it signed a definitive agreement to sell its Las Vegas Properties. To this end, MGM Growth Properties LLC ("MGP") and Blackstone Real Estate Income Trust ("BREIT") formed a joint venture to acquire MGM Grand Las Vegas for $2.5 billion.

Earlier, the company had announced two separate deals. MGM Resorts and BREIT will form a 95%/5% BREIT-led joint venture to acquire MGM Resorts’ Bellagio for $4.25 billion and then, lease it back to a unit of MGM Resorts for an annual rent of $245 million. Also, the company entered into a definitive agreement with an affiliate of Treasure Island owner, Phil Ruffin, to sell Circus Las Vegas for $825 million.

Shares of MGM Resorts have gained 18.3% in the past six months compared with the industry’s growth of 11.9%.

 

Zacks Rank & Stocks to Consider

MGM Resorts, which shares space with Las Vegas Sands Corp. LVS, has a Zacks Rank #3 (Hold).

Better-ranked stocks in the same space include Churchill Downs Incorporated CHDN and PlayAGS, Inc. AGS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Churchill Downs and PlayAGS have an impressive long-term earnings growth rate of 20% and 12%, respectively.

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