MGM Earnings: Digital Pressured by Competition, While Vegas and Macao Demand Remains Healthy

No-moat MGM’s shares declined 5% in July 31 after-hours trading, which we believe was tied to guidance that a low-double-digit return on investment for its digital business will not occur until around 2027, likely due to intense competition. We plan to lower our $55 fair value estimate by a mid-single-digit percentage on lower digital margins during 2024-28. While we rate shares as undervalued even after the lowered valuation, we think performance could be hindered until near-term visibility around MGM’s digital position is improved, which we see as a 2025 event at the earliest.