MGM and Caesars rise as Morgan Stanley upgrades the casino operators on strong outlook for Las Vegas recovery

MGM and Caesars rise as Morgan Stanley upgrades the casino operators on strong outlook for Las Vegas recovery

Shares of MGM Resorts and Caesars Entertainment climbed Monday as Morgan Stanley upgraded the companies to overweight ratings as it sees Wall Street 'grossly underestimating' the earnings potential for the companies from Las Vegas' recovery from the pandemic.

Morgan Stanley said analysts visited Las Vegas last week and found that the market was at the "beginning" of a strong recovery period, wrote analyst Thomas Allen in a note raising the companies from equal-weight ratings.

The midweek period was busy. "While we thought it was because of Spring Break & March Madness, numerous market participants told us their bookings were stronger than current occupancy, booking windows were extending and continued to build." 

MGM shares were up 5% after popping up by as much as 7.4% to $42.63. Caesar's stock added on as much as 5.2% when it reached $93.58 then later trimmed the gain to 3.8%.

Morgan Stanley said it upwardly revised some financial figures and that it foresees the most significant upside to EBITDA in the second quarter and third quarter of 2021. It said it's now ahead of Wall Street's EBITDA consensus estimate by 38% for the second quarter and by 36% for the third quarter.

Las Vegas is back to running at about