Deutsche Bank Likes MGM Resorts At Current Levels

Carlo Santarelli of Deutsche Bank on Wednesday commented on the earnings implications for MGM Resorts International (NYSE: MGM) following Las Vegas Strip data from the Las Vegas Convention and Visitors Authority.

Santarelli believes that MGM will report a solid fourth-quarter RevPAR (Revenue per available room) that will be in-line if not slightly above the company's guidance of a 5 percent gain. The analyst adds that despite Strip gross gaming revenue falling 9.2 percent in the quarter, more than half of the shortfall is accounted for in MGM's peers report and the entire year-over-year shortfall occurred in the lower margin table game segment.

"Since Las Vegas Sands reported 1/28/15, MGM shares are roughly flat, while concerns around Vegas results have heightened," Santarelli wrote. The analyst believes that subsequent data from LVCVA and Nevada GCB are "largely responsible" for developing expectations of a fourth-quarter Las Vegas Strip miss for MGM. This view persists despite the fact that over the past four quarters, MGM has generated a 15.5 percent premium to LVCVA Strip hotel RevPAR on an absolute dollar basis.

Bottom line, the data "painted a picture that is considerably worse than the reality for MGM," according to Santarelli and that "we would be buyers at current levels."

MGM is scheduled to report its quarterly results on February 17.

Shares are Buy rated with a $29 price target.

Shares closed Tuesday at $20.46, up 3.65 percent.