Shares of MGM Resorts International (NYSE:MGM) were up by 7.85% after news started making the rounds in the market that it was considering selling off the Mirage. Starwood Capital is said to be the potential buyer of the luxury hotel and analysts are expecting a price between $1 billion and $1.5 billion. Cameron McKnight, a Wells Fargo Securities gaming analyst, said that the casino company has dislocated its “international marketing team and players” from the hotel , further indicating the possibility of a potential transaction. In the past couple of months, MGM Resorts International (NYSE:MGM)’s primary attention has been towards the southern tip of its casino chain, along with increasing expenditures towards creating more hotel-casinos in Macau, Massachusetts, and Maryland. However, the company has thus far denied the selloff reports, stating that it does not comment on rumors or market speculation.
MGM Resorts International (NYSE:MGM) has had slow growth in 2015 primarily because of the poor performance of the Macau gaming market, although there have been some improvements lately. The resort-casino chain will announce its second quarter earnings on August 4, with expected earnings per share of $0.11 on revenues of $2.41 billion.
The stock has attracted activist investors like Keith Meister of Corvex Capital, who had 3.90 million shares of the company valued at $81.99 million at the end of the first quarter. It is important to take into account that Meister was the right-hand man of Carl Icahn, who himself is known for his sometimes-ruthless activist positions. The shares of MGM Resorts International (NYSE:MGM) have declined by 8.39% year-to-date. Smart money held a bullish outlook of the gaming-casino company during the first quarter, as 58 hedge fund managers holding $1.76 billion in shares compared to holdings valued at $1.45 billion held by 45 hedge fund investors three months earlier. The shares of MGM Resorts International (NYSE:MGM) were down by 1.64% during the first quarter of 2015. At the end of the first quarter, James Dinan’s York Capital Management was one of the major stockholders of the company, owning 9.94 million shares valued at $209.09 million. Daniel S Och’s OZ Management and Bain Capital’s Brookside Capital were among the other major investors of the company in our database.
In the eyes of analysts, MGM Resorts International (NYSE:MGM) is a “Strong Buy”, with at least 13 analysts recommending the same. The market has a consensus short-term price target of $24.44 for the shares of the company, indicating an upside potential of 24% from its current share price.
Considering the positive hedge fund sentiment, the involvement of an activist invetsor, and the potential sale of the Mirage, we recommend investors watch for the release of the second quarter earnings and consider making a move afterwards. Adding the stock at its current weakness is a promising idea for investors looking for long-term value.
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