Posted on: October 23, 2023, 04:06h.
Final up to date on: October 23, 2023, 04:47h.
On a day of broad-based power for gaming equities, MGM Resorts Worldwide (NYSE: MGM) and Wynn Resorts (NASDAQ: WYNN) had been two of the standouts after a sell-side analyst waxed bullish on journey and leisure shares.
In a observe to purchasers on Monday, HSBC analyst Meredith Jansen initiated protection of 9 journey and leisure equities with “purchase” scores. MGM and Wynn had been amongst that group. The analyst favors names “that leverage scale and a differentiated model to drive sustainable money era.”
We’re bullish on new demand classes and the modern applied sciences that may additional improve journey and leisure,” wrote Jansen.
She utilized a worth goal of $111 to Wynn, which suggests upside of about 23.3% from Monday’s shut. HSBC tagged shares of MGM Resorts with a worth forecast of $49. That means upside of 34.4% from Monday’s closing print of $36.64.
Asset-Mild Mannequin Stands Out
Jansen highlighted the significance of the asset-light enterprise mannequin, which has change into commonplace within the journey and leisure trade, noting it “separates the true property ‘bricks’ from the operators’ brawn and the manufacturers’ brains.”
That’s a strategy MGM has mastered with aplomb. Other than a stake within the property property of the Cosmopolitan on the Las Vegas Strip and a modest stake in gaming actual property funding belief (REIT) VICI Properties (NYSE: VICI), MGM’s actual property publicity is low because it pertains to its Strip and regional on line casino resorts. A sequence of property gross sales over the previous a number of years freed up money for the Bellagio operator to scale back debt, pursue acquisitions, and repurchase its shares.
Wynn took a web page from that playbook, saying in February 2022 that it bought the true property property of Encore Boston Harbor to Realty Revenue (NYSE:O) for $1.7 billion.
That operator owns the property of its namesake venue and Encore, in addition to unused land on the Strip, all of which might seemingly fetch engaging worth tags in a sale, however Wynn hasn’t signaled it’s seeking to offload its Las Vegas actual property.
Count on Journey and Leisure ‘Convergence’
HSBC’s Jansen added that “the strains between resorts, lodging actual property funding trusts, casinos, cruise strains, and on-line journey businesses will proceed to converge” as extra corporations within the journey and leisure enviornment embrace a brand new ecosystem that calls for extra environment friendly progress.