We recently published a list of 10 Cheapest Stocks to Buy On Robinhood. In this article, we are going to take a look at where MGM Resorts (NYSE:MGM) stands against other cheapest stocks to buy on Robinhood.
While the market has been on an upward trajectory for nearly two years now, the combination of seasonal trends, strong retail, and corporate activity, and positive market momentum following the November election still suggests a potential for continued growth in U.S. equities.
Goldman Sachs’ Scott Rubner predicts a year-end rally that will push the S&P to 6,200 points as reported by Bloomberg on November 25. He attributes this potential rally to growing retail enthusiasm in equities and crypto, seasonal trading patterns, and increasing corporate buyback demand.
Rubner noted that the recent consolidation phase is typical, and highlighted significant inflows into U.S. equities, with the broader market gaining over 3% since the November 5 presidential vote and the Russell 2000 rising 6.5%. Historically, strong market performance in election years tends to extend into January, with the capital being deployed at the start of the new year.
READ ALSO: Jim Cramer’s Lightning Round: 9 Stocks in Spotlight and 10 Best Renewable Energy Penny Stocks to Invest In.
Strategic Investment Moves in a Shifting Economy
In an interview with Seana Smith and Madison Mills of Yahoo Finance, Jim Smigiel, SEI’s Chief Investment Officer, highlighted several key insights for investors, in light of President-elect Donald Trump’s pro-growth policies. He warned that these policies could lead to higher inflation and rising interest rates, which may impact investment strategies. For investors, the focus should be on understanding how inflation and rates can affect different assets and staying prepared for potential shifts in the market.
Smigiel sees opportunities in small-cap stocks, value stocks, and financials, which are expected to benefit from the current reflationary environment. He suggested investors consider diversifying their portfolios to reduce reliance on highly concentrated growth sectors like tech. Active management, where professional fund managers select investments, could also be a useful strategy to broaden exposure and adapt to market changes.
While higher rates could eventually pose challenges, Smigiel noted that small-cap stocks remain attractive for now due to improved debt structures, providing a window of opportunity until around 2026. Investors should keep an eye on rising yields, as it might signal a need to shift toward more defensive investments. Diversification remains critical in managing risks during this period.
Our Methodology
For this article, we checked all the large-cap companies trading on Robinhood with at least 50% positive analyst ratings. We narrowed our list to nearly 40 stocks that were trading below a forward price-to-earnings multiple of under 15. We also skipped the stocks that were trading above or at their industry median despite trading below a PE ratio of 15. Finally, we chose the 10 cheapest stocks to buy based on their average analyst price target upside as of November 25 (pre-market open). These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? 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).
Aerial shot of an entertainment resort, its buildings and gaming amenities sprawling along the seafront.
MGM Resorts International (NYSE:MGM)
Market Cap: $11.255 billion
FWD PE Ratio: 14.73
Average Price Target Upside: 38.89%
MGM Resorts International (NYSE:MGM) owns and manages casino, hotel, and entertainment resorts across the U.S. and internationally. It operates through Las Vegas Strip Resorts, Regional Operations, and MGM China. Its properties feature gaming, hotels, dining, conventions, entertainment, retail, and other amenities. Casino offerings include slots, table games, online sports betting, and iGaming via BetMGM.
In the third quarter, while MGM Resorts (NYSE:MGM) missed analyst estimates in revenue and EPS, it delivered record-breaking numbers, including all-time highs in consolidated net revenue and adjusted property EBITDA at MGM China. Las Vegas saw a 1% revenue increase, a 2% rise in adjusted property EBITDAR, a 3% growth in average daily rate (ADR), and a 250 basis-point rise in occupancy, aided by $37 million in insurance proceeds related to a prior cybersecurity event. Regional properties achieved a 3% revenue increase and a 2% EBITDAR growth, supported by $15 million in insurance proceeds.
MGM China reported a 14% year-over-year revenue increase, a 5% rise in EBITDAR, and a 26% margin, with market share at 15%. BetMGM posted strong digital results, achieving profitability and a 70% rise in first-time depositors. International efforts included a joint venture with Grupo Globo in Brazil and preparations for launches in Osaka, New York, UAE, and Thailand.
Artisan Partners stated the following regarding MGM Resorts International (NYSE:MGM) in its Q3 2024 investor letter:
“We are always on the lookout for companies that are under pressure in some form or fashion as this can create the conditions for an attractive entry price. Though equity markets have made substantial gains over the past year, we have still found select opportunities to put capital to work. Q3 purchases included Warner Music Group, MGM Resorts International (NYSE:MGM) and Polaris.
MGM is a leading owner and operator of casinos in Las Vegas, at regional US locations, in China via its ~56% ownership of MGM China (Macau) and in the metaverse via iGaming and sports gambling app BetMGM. BetMGM is a 50% owned joint venture between Entain and MGM for online sports betting (OSB) and iGaming. Gaming is a good business. MGM generates a high-teens return on equity and consistent free cash flow. Free cash flow is used for stock buybacks and reinvestment into the business. We took advantage of the stock’s pullback in August when MGM reported earnings. Despite healthy results in Las Vegas and Macau, BetMGM continued to report losses, and there was cautious commentary about bookings ahead of the November Formula 1 race. Additionally, China macro concerns have been an overhang. The stock sells for about 13X FY1 earnings.”
Overall, MGM ranks 7th on our list of cheapest stocks to buy on Robinhood. While we acknowledge the potential of MGM as an investment, 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.
