Stock Wars: MGM Resorts International Vs. Wynn Resorts

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Photo by Kvnga on Unsplash

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector with the goal of determining which company is the better investment.

This week, the duel is between two hospitality and sports betting titans: MGM Resorts International (MGM) and Wynn Resorts, Limited. (WYNN).

The Case For MGM Resorts International

This company traces its roots to aviation industry executive and hotelier Kirk Kerkorian, who purchased the fabled Metro-Goldwyn-Mayer movie studio in 1969. Kerkorian was less interested in making movies than affixing the prestigious MGM name to his Las Vegas hotel properties. The studio’s importance in within the film industry waned during Kerkorian’s ownership, but Hollywood’s loss was Las Vegas’ gain.

Over the years, the company saw its name change a few times and it spun off MGM Growth Properties LLC (MGP) as a real estate investment trust in 2016. MGM Resorts International had its initial public offering in 1998 when it was known as MGM Grand.

Today, MGM Resorts International’s portfolio consists of 31 unique hotel and gaming destinations across the U.S. and in Macau, and it is pursuing an expansion into Japan. The company also partners with Entain ADR (GMVHY) on BetMGM, which offers U.S. sports betting and online gaming through brands including BetMGM and partypoker.

Since New Year’s Day, MGM Resorts International has been a rather busy company with multiple corporate developments including the launch of BetMGM’s sports betting presence in New York, Illinois, Louisiana, Puerto Rico and Washington, D.C.; a residency by Usher and upcoming shows by Lady Gaga and the Jonas Brothers at the company’s Park MGM venue in Las Vegas; and the signing of Edmonton Oilers captain Connor McDavid as its new brand ambassador. Last December, the company sold The Mirage hotel and casino to Hard Rock International for $1.075 billion in cash with the transaction expected to close in the second half of this year.

In its most recent quarterly earnings report, the fourth-quarter data published on Feb. 9, MGM Resorts International recorded net revenues of $3.05 billion, up from $1.49 billion one year earlier, and a net income of $131 million compared to a net loss of $447 million in the previous year. The fourth quarter of 2021 earnings per share of 23 cents was an improvement from the fourth quarter of 2020 sum of -92 cents.

"Our record fourth-quarter results are a testament to our talented team across the globe, our sharpened focus on operational efficiency and the proven resiliency of demand for the service and experiences that we provide at MGM Resorts," said CEO Bill Hornbuckle, who predicted further good fortune in 2022 via “the U.S. sports betting and iGaming market through BetMGM, pursuing disciplined geographic expansion such as the Japan integrated resort, and reinvesting in our core business to drive sustainable growth.”

MGM Resorts International’s shares opened for trading on Wednesday at $37.63. The stock’s 52-week range spans from $35.57 to $51.17.

The Case For Wynn Resorts

This company came about thanks to MGM Resorts International, which acquired Mirage Resorts from real estate executive Steve Wynn in 2000 for $4.6 billion. Wynn started this company through his 2000 purchase of Las Vegas’ Desert Inn for $270 million. Two years later, Wynn Resorts had its initial public offering.

Today, the company’s portfolio consists of Wynn Las Vegas, the Encore Boston Harbor in Massachusetts, and the Wynn Macau and Wynn Palace Cotai in Macau. It also owns the WynnBET, a casino and sports betting app, and is active in sports betting in six states.

Last month, the company announced an agreement to sell the land and real estate assets of Encore Boston Harbor to Realty Income Corp (O) for $1.7 billion in cash in a sale-leaseback transaction, with Wynn Resorts continuing to operate the property. The company’s lease will have an initial total annual rent of $100 million and an initial term of 30 years with one 30-year tenant renewal option.

Also in February, the company announced its involvement in a partnership with the property developers Marjan and RAK Hospitality Holding to build a resort development on the man-made Al Marjan Island in Ras Al Khaimah, United Arab Emirates, with an opening scheduled for 2026.

In other corporate developments, the company saw the retirement of CEO Matt Maddox on Jan. 31 and the ascension of President and CFO Craig Billings as his successor the next day.

In its most recent quarterly earnings, the fourth-quarter data published on Feb. 15, Wynn Resorts recorded $1.05 billion in operating revenues, up from $686.0 million one year earlier. The company also recorded a net loss of $177.2 million, down from a $269.5 million net loss in the previous year. The fourth-quarter net loss per share was -$1.54, versus -$2.45 in the fourth quarter of 2020.

In his first quarterly earnings report review, Billings insisted the company’s “relentless focus on five-star hospitality and world-class experiences allowed us to further extend our leadership positions in Las Vegas and Massachusetts in 2021.” Still, he offered rueful optimism that the company’s Macau operations “will benefit from the return of visitation over the coming quarters.”

Wynn Resorts’ shares opened for trading on Wednesday at $71.74. The stock’s 52-week range is $70.28 to $143.88.

The Verdict

Both companies weathered difficulties during the fourth quarter primarily due to their Macau properties with the market being challenged by both a resurgence in the COVID-19 pandemic and the Chinese government’s draconian restrictions on travel in the region.

As MGM Resorts International had a wider portfolio of U.S. properties, its Macau operations did not create a negative impact. But Wynn Resorts has two of its four properties in Macau, and its quarterly performance was adversely affected.

Looking ahead, the evaporation of COVID-era mandates and protocols will help rejuvenate the companies’ Las Vegas properties with more tourism and business travel heading to the city. The growing popularity of sports betting should also expand the companies’ revenue stream.

Both companies are looking overseas for new opportunities — MGM Resorts International in Japan, Wynn Resorts in the UAE — but it will be years before they reap potential success for those ventures. Their lack of new U.S. developments is not surprising, but one would assume they would find faster success at home instead of abroad, although both recently sold domestic properties.

Also, there’s something troubling that both companies have stocks trading near their 52-week lows. It’s a great opportunity for traders to go bargain shopping, though there is a strong possibility that a further souring of the U.S. economy into a recession could drive their shares even lower.

The verdict on this Stock Wars duel is a wait-and-see approach. There is no immediate evidence that either company is roaring into a vibrant 2022, and pausing for a quarter or two to see how they respond to current economic situations will help determine what their near-futures could look like.

© 2022 Benzinga does not provide investment advice. All rights reserved.

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