Are Investors Too Optimistic On MGM Resorts Stock?

Are Investors Too Optimistic On MGM Resorts Stock?

LAS VEGAS, NEVADA - AUGUST 28: Guests walk on a pedestrian bridge toward an entrance at MGM Grand ... [+] Hotel & Casino on the Las Vegas Strip amid the spread of coronavirus (COVID-19) on August 28, 2020 in Las Vegas, Nevada. (Photo by Ethan Miller/Getty Images) As the world economy grapples towards normalcy with an uptick in transportation demand, the hotel industry stocks have almost recovered to pre-Covid levels. The hospitality industry including integrated resorts such as MGM Resorts (NYSE: MGM) and Las Vegas Sands (NYSE: LVS), curtailed operational expenses to preserve cash and limit long-term debt. Interestingly, the demand for digital gaming solutions during the pandemic triggered a paradigm shift in the casino business. Nearly all conventional casinos are foraying into the American sports betting and iGaming industry. Despite MGM's revenues remaining 30% below pre-Covid levels due to a slump in Macau, the stock is being rewarded by investors due to the popularity of its sports betting application, BetMGM MGM . Considering strong competitive rivalry in the sports betting business and MGM stock's high current valuation multiple (P/S), Trefis believes that the stock price is stretched. We highlight the key factors driving MGM Resorts Valuation including revenues, earnings,