Philip CarterWednesday, Jul 2, 2025 9:12 pm ET
69min read
The gaming sector in Macau is undergoing a transformative recovery, and MGM Resorts (MGM) stands at the intersection of this revival. With its dominant Macau subsidiary, MGM China, the company is poised to capitalize on a regulatory-driven shift toward non-gaming growth and economic diversification. Yet, its stock currently trades at a significant discount to its 52-week high, raising the question: Does this undervaluation reflect genuine risk—or a buying opportunity? Let’s dissect the data.
Valuation: A Discounted Opportunity
As of June 2025, MGM’s stock price sits at $36.89, nearly 25% below its 52-week high of $47.26. This gap suggests skepticism around Macau’s recovery or MGM’s execution. However, the company’s financial metrics tell a different story.
MGM China’s Q1 2025 results revealed Adjusted EBITDA of HK$2.4 billion, a 11% sequential jump and 146% of pre-pandemic (2019) levels. While year-over-year Segment Adjusted EBITDAR dipped 5%, this was offset by improved margins (29.6%) and a strengthened market share of 15.7% in GGR. The sequential growth underscores momentum, especially as Macau’s visitor arrivals rebound. With $2.27 billion in cash and a $2 billion buyback program, MGM is aggressively repurchasing shares, boosting per-share metrics and signaling confidence in its valuation.
Growth Catalysts: Non-Gaming and Macau’s Diversification
Macau’s government has mandated a “1+4” strategy, prioritizing tourism-driven economic diversification. MGM China is responding aggressively:
- Non-Gaming Investments:
- A $2 billion syndicated loan will fund expansions like premium gaming suites, the Poly Art Museum, and the Macau 2049 residency show. These projects aim to attract high-end tourists and drive non-gaming revenue, which Macau aims to boost to 60% of GDP by 2028 (up from 37% in 2023).
-
MGM’s Las Vegas parent company is also leveraging synergies, such as the MGM Rewards loyalty program (50 million members) to cross-sell experiences in Macau.
-
Regulatory Alignment:
- New laws like Law no. 20/2024 criminalize illegal online gambling and tighten compliance, but MGM’s focus on licensed, high-margin non-gaming offerings positions it to thrive under stricter oversight.
- The government’s push for CSR and labor initiatives aligns with MGM’s existing commitments, reducing regulatory risk.
Risks: Macau’s Fragile Recovery and Debt
While optimism is warranted, risks linger:
– Slow Gaming Recovery: MGM China’s Q1 table games revenue dipped 5%, highlighting reliance on high rollers. Macau’s VIP segment remains volatile.
– Debt Management: MGM’s net debt of $6.4 billion, though manageable, could constrain flexibility if Macau’s recovery stalls.
– Global Competitors: Rivals like Sands China and Wynn Macau are also investing in non-gaming attractions, intensifying competition.
Investment Thesis: Buy with a Long-Term Lens
MGM’s current valuation appears unjustifiably low given its strategic moves and Macau’s structural tailwinds. The stock’s 25% discount to its 52-week high creates a compelling entry point, especially as:
– Non-gaming projects begin generating revenue by 2026–2027.
– Macau’s tourism rebound accelerates post-pandemic, supported by easing travel restrictions.
– MGM’s buybacks reduce shares outstanding, enhancing EPS and EBITDA per share.
A target price of $45–$50 (closer to the 52-week high) seems reasonable if Q2 2025 results confirm recovery momentum. Investors should watch for signs of stabilized gaming revenue and non-gaming revenue growth exceeding 30%.
Conclusion
MGM Resorts is a leveraged play on Macau’s transformation—a market where its non-gaming investments and operational discipline give it an edge. While risks exist, the undervalued stock price and strategic alignment with Macau’s future suggest this is a buy for patient investors. The next 12–18 months will be critical as MGM executes its growth roadmap, but the long-term upside in Asia’s gaming epicenter makes this a compelling bet.
