We came across a bullish thesis on MGM Resorts International (MGM) on Substack by David. In this article, we will summarize the bulls’ thesis on MGM. MGM Resorts International (MGM)’s share was trading at $26.30 as of April 7th. MGM’s trailing and forward P/E were 10.96 and 11.59 respectively according to Yahoo Finance.
A general view of a luxury resort casino, surrounded by a beautiful landscape and illuminated at night.
MGM Resorts (MGM) emerges as a misunderstood and potentially undervalued opportunity in today’s market, largely overlooked due to prevailing macroeconomic worries like recession fears and geopolitical tensions. Yet MGM’s business—centered around gambling, entertainment, and hospitality—is not only deeply resilient but often counter-cyclical, as history shows. During the 2008 financial crisis, MGM reported net income losses due to asset write-downs, but its operational cash flow held steady, highlighting the robust and sticky nature of consumer spending on escapism during downturns. MGM’s core appeal lies in its ability to monetize this behavior through an iconic portfolio of properties including the Bellagio, ARIA, MGM Grand, and The Cosmopolitan on the Las Vegas Strip. These aren’t just casinos—they’re global brands embedded in the cultural consciousness. Internationally, MGM commands a strong presence through its stake in MGM China and its joint venture with Orix to build Japan’s first integrated resort, reinforcing its status as a global gaming powerhouse.
The company’s pivot toward an asset-light model is one of its most strategic evolutions. By selling off its Las Vegas real estate to Vici Properties and entering into long-term triple-net leases, MGM has generated billions in liquidity while retaining operational control of its most valuable assets. Although the $2.3 billion annual rent may initially seem burdensome, the lease terms are favorable and capped, enabling MGM to hedge against inflation and real estate volatility. With $484 million still owned in real estate and freedom to operate its resorts, MGM has effectively unlocked capital for reinvestment and share repurchases without sacrificing its operational muscle. Critics may point to its low or negative shareholder equity under GAAP accounting, but that ignores the powerful free cash flows, brand equity, and leasehold assets that are not fully reflected on traditional balance sheets.
Perhaps the most overlooked transformation at MGM has been its capital return strategy. Since 2015—and more aggressively over the past four years—the company has moved away from dividends and toward a focused share buyback program. This decision has dramatically reshaped the shareholder base and improved per-share economics. In just four years, MGM has repurchased 42.1% of its outstanding shares—a rare feat for any company. These buybacks have not been funded by unsustainable debt levels, but by strong operating cash flows and sound financial stewardship. With a current P/E of just 11, MGM’s buyback program amplifies value creation, especially during price dips, and offers investors a tangible return of capital backed by disciplined balance sheet management.
Beyond the numbers, MGM also benefits from several of Hamilton Helmer’s “7 Powers”—a framework for evaluating competitive moats. While it doesn’t derive strength from scale or network effects, MGM’s brand power is undeniable. Properties like the MGM Grand and Bellagio are not easily replicable and command customer loyalty and premium pricing. Additionally, the company holds “cornered resources” in the form of irreplaceable real estate along the Las Vegas Strip—a finite asset with enduring value. Its ability to execute complex operations, manage regulatory environments, and deliver high-end customer experiences also speaks to its “process power,” creating barriers to entry that insulate its market position.
From a financial lens, MGM’s core casino operations remain its most profitable and resilient segment, generating more income than rooms, dining, or entertainment combined. This centrality of gambling not only reflects consumer behavior but underpins the company’s long-term cash generation engine.
In sum, MGM is a business with misunderstood fundamentals and a narrative clouded by superficial accounting metrics and industry biases. Its asset-light transition, relentless buybacks, and irreplaceable brand and real estate advantages position it as a compelling investment with limited downside. The stock has lagged the S&P 500 historically, but the company is no longer the same. With a leaner structure, a focused capital return policy, and strong management execution, MGM is poised for a potential re-rating. Investors who can see past short-term concerns and embrace the strategic shift may find themselves holding a rare combination of undervaluation, durability, and asymmetric upside.
MGM Resorts International (MGM) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 47 hedge fund portfolios held MGM at the end of the fourth quarter which was 46 in the previous quarter. While we acknowledge the risk and potential of MGM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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 was originally published at Insider Monkey.