Outlook Reserves Space for MGM's BetMGM
In their latest analysis, Jefferies' David Katz shared his thoughts after meeting with MGM Resorts management in Las Vegas. The company had reported impressive fourth-quarter results, largely due to their operations in Las Vegas and Macau.
Although BetMGM, MGM's 50%-owned online gaming entity, was profitable (EBITDA) in the second half of 2023, they've lost some market share, according to MGM's executives. While they were enthusiastic about their land-based casinos, their enthusiasm for iGaming and BetMGM was somewhat more muted.
In its most recent financial statement, BetMGM aims to achieve $500 million EBITDA by 2026.
Potential for BetMGM
BetMGM, currently at third place in the online sports betting market after FanDuel and DraftKings, is holding steady in iGaming. MGM management believes the joint venture with Entain Plc, which owns the other 50% of BetMGM, can thrive.
However, the future remains unclear. There's speculation that Entain, who's currently transitioning with CEO Jette Nygaard-Andersen's departure, could consider selling its stake in BetMGM to MGM. This would benefit the seller by raising funds and allowing them to focus on other markets. It would also make more sense for MGM, as they have a strong balance sheet but might not be able to afford a full acquisition of Entain.
Investing in iGaming
Even though MGM's executives appeared cautious about iGaming, they still see growth potential in this area. Jefferies' Katz observed that MGM continues to invest in digital ventures, which could lead to further acquisitions, as they did with LeoVegas in 2022.
Although MGM isn't hurting for cash, Katz notes that investing in digital acquisitions may have a greater impact on the company's shares in the long run. He also noted that as the need for capital increases, share repurchases may become less attractive.
In summary, MGM seems confident about their physical casinos, cautiously optimistic about BetMGM, and focused on growth opportunities in the digital space, potentially through more acquisitions like LeoVegas.
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