Hook & thesis
MGM Resorts is a beaten-but-not-broken story. The company combines a high-quality Las Vegas asset base (Bellagio, MGM Grand, Mandalay Bay), a growing digital business, and international exposure through MGM China and new openings like MGM Osaka. At today's price-level the market is paying roughly $14.2B of enterprise value for a business generating meaningful free cash flow - about $1.37B last reported. That combination gives us scope to be opportunistic.
Technically and strategically, the pieces look like they're falling into place: the stock is trading above the 50-day moving average, momentum indicators are constructive (RSI ~56.7, MACD showing bullish momentum), and short interest remains elevated but not extreme - creating a backdrop where positive catalysts can move the tape meaningfully. We're upgrading MGM to an actionable long trade with a clear entry, stop and target for a 180 trading day horizon.
What the company does and why investors should care
MGM Resorts International operates a diversified portfolio of casino resorts across the Las Vegas Strip, regional U.S. properties, Macau (MGM China), and a digital arm (MGM Digital / LeoVegas). The business model combines recurring cash flow from gaming and hospitality operations with higher-growth optionality from online gaming and international development projects. For investors, that mix means both defensive cash generation and upside from reopening/expansion catalysts and digital monetization.
Fundamentals and valuation - concrete numbers
At the current market price, MGM's market capitalization is roughly $10.0B with an enterprise value around $14.23B. Key valuation and cash metrics to anchor the thesis:
- Free cash flow: ~$1.369B (recent reported)
- EV/EBITDA: ~6.36x
- Price-to-sales: ~0.58x
- Price-to-book: ~3.77x
- Enterprise value: ~$14.23B
Those numbers signal a deal: an asset-heavy leisure operator generating meaningful free cash flow at a low EV/EBITDA multiple, especially when compared to historical norms for high-quality resort owners or other leisure names (which historically trade at higher multiples when growth resumes). The company also shows modest liquidity on balance-sheet ratios (current ratio ~1.23, quick ratio ~1.19) and a sizeable operating footprint producing diversified revenue.
Recent operational and market context
MGM had a challenging 2025 tourism environment on the Las Vegas Strip, which pressured revenue and EBITDA. That said, the market appears focused on two threads that could drive a re-rating in 2026: 1) capital allocation discipline - MGM's withdrawal from the New York city casino competition (10/18/2025) reportedly conserves roughly $2.8B of capital to re-deploy into higher-return opportunities; and 2) growth from digital and international operations. Analysts and industry reports highlight a structurally growing casino-hotel market with a projected CAGR near 4.9% through 2032, which favors operators with scale and product breadth.
Technicals and market structure
The tape supports a constructive trade setup. Price is above the 50-day average (~$35.43) and the 10/20-day averages (~$34.18/$34.38). Momentum readings (RSI ~56.7) are in a comfortable zone and MACD shows bullish momentum. Short interest remains meaningful - recent filings show short interest north of ~25.7M shares with days-to-cover in the 4-6 range historically - which can amplify positive moves if catalysts materialize.
Valuation framing - why now
Paying ~6.4x EV/EBITDA for an operator with $1.37B of free cash flow looks cheap relative to cyclical recovery stories. Market participants often re-rate leisure names when visibility on Las Vegas visitation and margins improves or when digital revenue accelerates. A conservative re-rating to the low-mid-teens EV/EBITDA range would imply material upside even without aggressive multiple expansion or acquisitions. Put simply: the combination of meaningful cash generation, a reasonable balance sheet, and the potential redeployment of capital freed up from abandoned bids makes the current valuation attractive for a patient buyer.
| Metric | Value |
|---|---|
| Market cap | $10.0B |
| Enterprise value | $14.23B |
| Free cash flow | $1.37B |
| EV/EBITDA | 6.36x |
Trade plan (actionable)
Trade direction: Long
Entry price: $36.00
Stop-loss: $33.00
Target price: $42.00
Horizon: long term (180 trading days) - I expect this trade to take time as operational improvements, FCF conversion and strategic capital redeployment drive sentiment. The 180 trading day window gives room for the company to realize improvements in digital monetization and for Las Vegas visitation/mix to normalize.
Rationale for levels: Entry at $36.00 is a slight premium to the intraday price to avoid getting picked off on intraday volatility. The stop at $33.00 limits downside to idiosyncratic execution or macro shocks; it sits below recent technical support and the 50-day SMA, providing a clear invalidation of the constructive technicals. Target $42.00 is just above the prior 52-week high of $41.32 and reflects a rerating to a healthier multiple as growth and margin recovery become visible.
Catalysts
- Digital momentum - BetMGM / LeoVegas revenue acceleration or margin improvement that demonstrates scalable online economics.
- MGM Osaka ramp and Macau/MGM China recovery - improving international contributions to revenue and EBITDA.
- Steady free cash flow generation and disciplined capital allocation - redeployment of capital saved from strategic withdrawals into higher-return projects or debt reduction.
- Broader Las Vegas tourism recovery - increased RevPAR and greater convention business could quickly translate to operating leverage.
- Macro tailwinds or sector re-rating - leisure re-opening narratives or positive industry data (e.g., stronger than expected visitor numbers) could lift multiples.
Risks and counterarguments
No trade is without risk. Below are the principal downsides and a counterargument to the bullish case.
- Leisure demand weakness persists: If Las Vegas visitation, convention bookings, or premium gaming demand remain soft, EBITDA could stay depressed and the market could assign a structurally lower multiple.
- Online gaming profitability disappointment: BetMGM and LeoVegas are growth engines, but online units are capital intensive and have historically drawn skepticism. If digital margins don't improve, the expected re-rating may not materialize.
- Balance sheet leverage: Debt-to-equity ratios are elevated for an asset-heavy operator (debt/equity ~2.34), which leaves less room for cyclical shocks or aggressive buybacks without impacting ratings and interest costs.
- Macau/regulatory or geopolitical risks: MGM's international operations expose it to policy risk, and any adverse changes in Macau's operating environment could hit the international revenue stream.
- Sector re-rating risk: Leisure stocks are cyclical. If the market rotates away from cyclical leisure names, multiple expansion may lag even if fundamentals improve.
Counterargument: A legitimate bearish view is that MGM’s best days of multiple expansion are behind it due to secular pressures on Las Vegas tourism and the intense competition in online gaming, which would keep the stock range-bound. That view is reasonable, especially given recent underperformance versus the broader market. Our trade accepts that risk but argues the valuation and catalysts provide an asymmetric payoff if the company executes.
What would change my mind
I would re-evaluate the long stance if any of the following occur: 1) a sustained deterioration in free cash flow or a negative revision to FCF guidance; 2) an unexpected regulatory shock in Macau or a material online gaming regulatory constraint; 3) a technical break below $33.00 with high volume confirming a structural shift in market sentiment; or 4) management signals a return to heavy capital expenditure or aggressive M&A that meaningfully increases leverage without a clear ROI pathway.
Conclusion
MGM is a high-quality operator trading at an attractive EV/EBITDA multiple with sizable free cash flow. The combination of strategic capital redeployment, digital growth optionality and international ramps gives the company multiple pathways to re-rate. For disciplined, horizon-aware traders, the risk/reward looks favorable at an entry of $36.00 with a stop at $33.00 and a target of $42.00 over the next 180 trading days. This is a tactical upgrade: the name is not without execution risk, but the upside from cash-flow-driven valuation expansion is compelling enough to act now.
Trade idea snapshot: Long MGM - Entry $36.00, Stop $33.00, Target $42.00, Horizon: long term (180 trading days), Risk: medium.