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MGM Cautiously Optimistic On BetMGM Outlook

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MGM Cautiously Optimistic On BetMGM Outlook

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Posted on: February 23, 2024, 02:08h. 

Final up to date on: February 23, 2024, 02:39h.

Whereas broadly bullish on the prospects for its built-in resorts in Las Vegas and Macau, MGM Resorts Worldwide (NYSE: MGM) is extra restrained within the optimism it’s directing to BetMGM and iGaming.

BetMGM
The BetMGM brand. Half-owner MGM Resorts Worldwide is optimistic concerning the betting on-line betting firm’s future. (Picture: NY Sports activities Day)

That’s the take of Jefferies analyst David Katz who lately met with MGM administration in Las Vegas. Earlier this month, the Bellagio operator reported document fourth-quarter outcomes, helped largely by its Sin Metropolis and Macau venues.

Whereas BetMGM was worthwhile on the premise of earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) within the second half of 2023, MGM administration acknowledged that the web gaming entity during which it owns 50% shed some market share. Katz famous that whereas MGM executives waxed “bullish” on land-based casinos, they’re simply “optimistic” relating to iGaming and “considerably extra measured about BetMGM.”

In its newest monetary replace, BetMGM reiterated that it expects to realize $500 million EBITDA in 2026.

Hope for BetMGM

Whereas BetMGM runs third to FanDuel and DraftKings (NASDAQ: DKNG) in on-line sports activities betting market share, and is in first rate place within the iGaming realm, MGM administration instructed Katz the 50/50 three way partnership with Entain Plc (OTC: GMVHF) can “flourish.”

How that materializes stays to be seen. Entain is in a interval of transition after activist buyers pressured the ouster of former CEO Jette Nygaard-Andersen. A few of these activists have direct ties to MGM, stirring hypothesis that the on line casino large will revisit a takeover bid for its BetMGM companion — an concept beforehand endorsed by Katz.

Earlier than her departure, Nygaard-Andersen mentioned joint ventures don’t final perpetually, and it’s potential that new executives and administrators at Entain may favor a sale of its 50% in BetMGM to MGM. That will increase money for the vendor and permit it to concentrate on markets exterior the US.

That will additionally probably be the popular and definitely essentially the most cost-effective possibility for MGM, too. On the finish of 2023, MGM had $2.92 billion in money and money equivalents, giving it one of many stronger stability sheets within the trade, however the gaming firm would wish extra firepower to make a reputable provide for Entain in its entirety.

Anticipate Extra iGaming Acquisitions

Whereas MGM executives have been conservative of their iGaming feedback to Katz, it’s clear they continue to be constructive on the house as a result of the analyst famous the administration staff “stays targeted on digital as an space of development warranting funding.”

That features extra acquisitions similar to the operator’s $604 million acquisition of LeoVegas in 2022. Whereas MGM isn’t capital-constrained, Katz noticed the gaming firm may deploy more money to digital acquisitions over share repurchases with the previous probably being extra rewarding for long-term buyers.

“As the necessity for capital turns into higher, alternatives for repurchases are offset. Our view has been that the buybacks are reasonably productive, whereas the potential for development in digital and new markets could possibly be much more impactful on the shares,” concluded the Jefferies analyst.

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