Here's Why MGM Stock Is a Great Buy for Long-Term Investors

By Larry Ramer

In light of MGM’s several huge, long-term, positive catalysts, along with its exceptionally low valuation, MGM Resorts International stock (MGM) is definitely an excellent buy for investors with long-term time horizons.

Brazilian Online Offering Should Be a Big Winner

Last quarter, BetMGM’s top line jumped 34% versus the same period a year earlier to $657 million. MGM owns 50% of BEtMGM, which is a joint venture with Entain.

Encouragingly, the net revenue of its online sports business soared 68% year-over-year to $194 million, strongly suggesting that the significant changes which  the venture made to its sports-betting platform are bearing a great deal of fruit.  

And after the JV generated an EBITDA loss of $244 million in fiscal 2024, it generated positive EBITDA of $22 million last quarter and expects to generate positive EBITDA in FY25. What’s more, BetMGM is predicting that it will generate annual EBITDA of  $500 million “in the coming years.”

One powerful, upbeat catalyst that can help the joint venture reach that figure is more states legalizing online gambling. In March, CEO Bill Hornbuckle indicated that a number of large states run by Democrats, including New York, Maryland and Illinois, could legalize online casino gaming in the not-too-distant future.

“If a single state comes onboard, there are big numbers to be had there,” Hornbuckle said. 

MGM will obtain half of BetMGM’s operating income. If the joint venture reaches its EBITDA goal of $500 million and generates operating income of $400 million, MGM will receive $200 million from the JV. 

A $200 million increase in the company’s bottom line would represent  a 27% surge in the metric. That’s based on its 2024 results, when it generated net income of $747 million. 

Japan Looks Very Promising, NY Could Also Be a Huge Catalyst

In December, MGM received a five-year license to offer online gaming in the very large market of Brazil. Since the company is partnering with a huge media conglomerate in the country, Groupo Globo, while MGM has its own strong brand,  I’m bullish on its ability to generate large amounts of  revenue and profits from its Brazilian business in the long term. 

Hornbuckle is also upbeat on the venture, offering “There is leverage off (Globo’s) database which will ultimately position us to really excel there.” He noted that “Globo has as many viewers as “CBS, NBC, and Disney combined in the US.” 

And during the firm’s April 30 earnings, analysts were told “Things are starting off terrific in Brazil.”

In Japan, MGM, in partnership with local financial services firm Orix, is building the country’s first casino, which is slated to launch early in 2030. Estimated to cost nearly $9 billion, the project is supposed to include 2,500 hotel rooms. 

MGM will have a 43.5% stake in the collaboration.

If the complex, like BetMGM, produces $200 million of annual income for the company (which seems like a realistic goal), it will increase the company’s bottom line by another 27% compared with 2024 levels. 

Meanwhile, MGM is seen as one of the leaders in the race to obtain one of three casino licenses up for grabs this year in downstate New York. That makes sense, since MGM already has a venue with slots and a racetrack in Yonkers, NY, along with the backing of that suburban New York locality’s mayor for a full casino license. 

And the state regulator designated to pick the winning bids has said that New York is looking to have casinos launch as quickly as possible after licenses are awarded. Since MGM, along with one other applicant, already has a large gambling venue in the region, it seems to have the inside track to obtaining one of the licenses.

Given the huge size of the New York City area, the region’s first three full-service casinos are likely to be very lucrative.  

MGM Stock Valuation Extremely Attractive for Long-Term Investors

On that April 30 call, CFO Jonathan Halkyard noted that “When you strip out the value of (MGM’s China venture) at its market value and assign a consensus value to our BetMGM venture, you end up with an implied multiple of just 3.3 times trailing twelve month adjusted EBITDA, to say nothing of the value of MGM Digital, the business we know is capable of a billion dollars in run rate top line with double-digit EBITDA margins.”

In addition to the Brazilian business, MGM Digital includes LeoVegas, a mobile casino business which focuses on European markets. BetMGM is not incorporated into the MGM Digital subsidiary.  

Given Halkyard’s statement, along with the high likelihood of strong growth by BetMGM and Brazil, the valuation of MGM stock is extremely attractive for long-term investors. Throw in the upcoming Japanese casino and the potential New York casino, and MGM’s shares are currently trading at a great entry point for those with a time horizon of five years or more.

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Larry Ramer is currently ranked 630 out of 31,088 financial bloggers analyzed by TipRanks, with a 10.0% average return on his buy and sell ratings. He has been a long-time contributor to Insider Monkey, Seeking Alpha and InvestorPlace. He is one of the founding contributors to this newsletter.

He focuses on contrary investing and specializes in the renewable energy and consumer discretionary sectors. Among his highly successful, contrarian picks have been Plug Power, Exxon Mobil, solar stocks, and airline stocks. On the downside, he was an early predictor of the collapse of cryptocurrencies, marijuana stocks, Ocugen, and Meta Platforms.