We recently compiled a list of the 10 Best Entertainment Stocks To Buy According to Analysts. In this article, we are going to take a look at where MGM Resorts International (NYSE:MGM) stands against the other best entertainment stocks to buy according to analysts.
An Overview of the Entertainment Industry
According to a report by The Business Research Company, the international entertainment and media industry was valued at $2.51 trillion in 2023. It is expected to grow at a compound annual growth rate (CAGR) of 7% to reach $3.55 trillion by 2028. Growth in the entertainment industry is driven by the rapid adoption of subscription models, the evolution of live events, and the use of augmented and virtual reality technologies.
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A report published by FTI Delta earlier this year highlighted some significant trends and challenges in the media and entertainment industry. As per the report, the live entertainment sector has experienced a robust recovery, with global spending on live music in 2023 increasing by 49% compared to 2019. Major sports leagues, including the NFL, NBA, MLS, NHL, and IndyCar, have not only recovered but surpassed pre-pandemic attendance levels. The post-pandemic recovery within the industry has not been uniform. For instance, the filmed entertainment industry faced severe challenges in late 2023 due to strikes by the Writers Guild of America (WGA) and SAG-AFTRA. These disruptions led to a more than 70% decline in production and marketing expenditures, compounding existing issues from early 2023 when studios were already tightening budgets. As a result, spending in 2023 was down approximately 35% from 2022, reflecting a struggling market. The report anticipates recovery for filmed entertainment post-strike to be more subdued than previous rebounds, with projections of about 25% year-over-year growth in 2024.
On the bright side, the report highlighted a significant growth trajectory for United States TV and connected TV (CTV) advertising, emphasizing the transformative impact of CTV on the advertising landscape. The combined US TV and CTV ad spending is projected to approach $100 billion by 2027, with CTV being the primary driver of this growth. In 2024 alone, CTV advertising is expected to increase by $5.5 billion, representing a 22% year-over-year growth. The surge in CTV advertising is largely attributed to the rise of premium ad-supported streaming services.
In addition to a robust performance expected within the advertising segment, the gaming sector remains resilient. The video game industry achieved a CAGR of 9.2% from 2019 to 2022. Despite a 6.3% decline from the peak surge during the COVID-19 pandemic, console sales in 2022 remained 18% higher than pre-pandemic levels, indicating strong ongoing demand for gaming hardware. As per the report, the overall outlook for the video game market remains positive, with expectations of above mid-single-digit growth throughout the next year.
An exterior shot of a bustling resort and casino, framed by the stability of a nearby mountain range.
Our Methodology
To compile the list of the 10 best entertainment stocks to buy according to analysts, we used the Finviz stock screener and our previous articles. Using these two sources we aggregated an initial list of entertainment stocks sorted by their market capitalization. Next, we checked analysts’ upside potential for each stock and shortlisted stocks with an analyst upside potential of at least 25%. Lastly, we ranked our stocks in ascending order of the analysts’ upside potential. We have also added the number of hedge funds holding each stock sourced from Insider Monkey’s Q3 2024 database. Please note that the data was collected on December 13, 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
MGM Resorts International (NYSE:MGM)
Analysts’ Upside Potential: 40.69%
Number of Hedge Funds: 46
MGM Resorts International (NYSE:MGM) is one of the largest casino entertainment and hospitality companies. It operates around 18 properties in the United States and Macau, with significant development underway in Japan and Dubai. The company functions through Las Vegas Strip Resorts, Regional Operations, and MGM China. Its properties have gaming, hotels, dining, conventions, entertainment, retail, and other facilities.
The Las Vegas Strip is one of the most prominent gambling and casino locations. According to the Nevada Control Board, the Las Vegas Gross Gaming Revenue (GGR) has grown more than 4 times over the past 30 years. MGM Resorts International (NYSE:MGM) has benefited significantly from its operations at this location with its adjusted property EBTIDAR from Las Vegas growing 94% between 2019 and 2023. Considering the encouraging results, management on October 21 announced an agreement with Marriott International to launch W Las Vegas, which will be a new hotel on the Las Vegas Strip. W Las Vegas will be the 12th property included in the MGM Collection with Marriott Bonvoy, which allows Marriott’s vast member base to enjoy benefits at MGM Resorts locations.
Financially speaking, MGM Resorts International (NYSE:MGM) reported record consolidated net revenues for the third quarter of 2024, with significant contributions from its operations in MGM China. The consolidated net revenue of the company was $4.2 billion, an increase of 5% compared to the same quarter last year. MGM China grew its revenue by 14% to $929 million. The segment was positively affected by the lifting of COVID-19-related travel restrictions.
Meridian Hedged Equity Fund stated the following regarding MGM Resorts International (NYSE:MGM) in its Q3 2024 investor letter:
“MGM Resorts International (NYSE:MGM) is a global hospitality and entertainment company with a portfolio of destination casino resorts, primarily in Las Vegas, regional U.S. markets, and Macau. While MGM reported better-than-expected operating results in the quarter, driven by strength in both Las Vegas and Macau, its share price has been under pressure due to two main factors. First, BetMGM’s performance has lagged expectations, with ongoing losses and increased competition affecting investor sentiment toward the online gaming sector. Second, and perhaps of more immediate concern to the market, were management’s comments about softening early demand trends for the upcoming Formula One race in Las Vegas, raising concerns about potential weakness in the fourth quarter. While these factors contributed to volatility, we view them as likely short-term headwinds that do not materially impact our long-term investment thesis. As a result, we held our position steady in the period. We believe the company’s underlying fundamentals remain strong, and its assets provide an attractive fundamental floor value.”
Overall, MGM ranks 5th on our list of best entertainment stocks to buy according to analysts. While we acknowledge the potential of MGM to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MGM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
