Why MGM Resorts Came Up a Loser in 2011
As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.
Today, let's take a look at MGM Resorts (NYS: MGM) . The company that runs landmark Vegas hotels like the Mirage, Bellagio, and the MGM Grand is a well-known player in the gaming industry, but even after surviving a near-meltdown in late 2008 and early 2009, the stock has lagged behind some of its competitors. Below, I'll take a closer look at the events that moved shares of MGM Resorts this year.
Stats on MGM Resorts
|Year-to-Date Stock Return||(29.8%)|
|Market Cap||$5.09 billion|
|Total Revenue, Trailing 12 Months||$6.99 billion|
|Net Profit, Trailing 12 Months||$3.09 billion|
|1-Year Revenue Growth||15.9%|
|Cash / Debt||$1.97 billion / $13.5 billion|
|CAPS Rating (out of 5)||***|
Sources: S&P Capital IQ; Motley Fool CAPS.
How did MGM Resorts do this year?
MGM's 2011 left its shareholders feeling like the biggest losers. The company faces several challenges that left its shares in the dust behind some of its competitors.
The first problem MGM faces is that it's largely centered in Las Vegas, which has become the has-been of the gaming world. With rivals Las Vegas Sands (NYS: LVS) and Wynn Resorts (NAS: WYNN) increasingly focusing on the strong Asian gaming markets, MGM has to depend largely on the health of the Vegas Strip, where gaming wins have fallen steadily since their 2007 peak. MGM does have a majority interest in a casino in Macau, but that's a far cry from the properties its Vegas peers own, as well as Macau-focused Melco Crown (NAS: MPEL) and its presence in Asia.
The other big problem is MGM's debt. At nearly twice its annual revenue, that debt will prove problematic to service even if a full rebound surfaces.
In recent days, though, prospects of legalizing online poker have boosted MGM shares. MGM and Boyd Gaming (NYS: BYD) have said that they would join a venture with longtime online player Party Poker if U.S. online poker becomes legal. A recent opinion from the Department of Justice may open the door to legalization, but proponents have waited for years without success until now.
All in all, MGM doesn't look like the best bet in the world. We've got another stock we like better, and although we can't promise you a sure thing, you'll definitely want to take a closer look. Check out the Motley Fool's latest special report to discover our top stock pick for 2012. It's free but it won't be available for long, so get your copy now.
Click hereto add MGM Resorts to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
At the time this article was published