Bear Thesis: MGM Resorts Faces Headwinds Amidst Weakened Fundamentals and Technical Downtrend
MGM Resorts International (NYSE: MGM) exhibits deteriorating financial health, weakening segment performance, and a pronounced technical downtrend, suggesting further downside from the current ~$35.36 share price. Despite sporadic revenue gains in international ventures and digital gaming, high leverage, thin margins, and subdued U.S. consumer spending underscore a bear case.
Financial Health: Thin Margins, Heavy Leverage, Slowing Profit
A review of MGM’s key financial metrics reveals stretched balance-sheet ratios and profit erosion:
| Metric | Period | Value |
|---|---|---|
| Revenue (TTM) | As of Jun 2025 | $17.21 B |
| Revenue (Q2 2025) | Q2 2025 | $4.40 B |
| Net Income (TTM) | As of Jun 2025 | $536 M |
| Net Income (Q2 2025) | Q2 2025 | $49 M |
| EPS (TTM) | As of Jun 2025 | $1.83 |
| EPS (Q2 2025) | Q2 2025 | $0.18 |
| Profit Margin | TTM | 3.14 % |
| Return on Equity | TTM | 21.8 % |
| Return on Assets | TTM | 2.21 % |
| Total Cash | Most Recent Qtr | $2.16 B |
| Debt/Equity | Most Recent Qtr | 844.0 % |
| Levered Free Cash Flow (TTM) | TTM | $892 M |
| Forward P/E | — | 12.9× |
| EV/EBITDA | — | 17.3× |
• Revenue growth has decelerated: Q2 2025 revenue rose just 2% year-over-year, while net income plunged 67%.
• Margins tightened: a 3.14% profit margin is low for a hospitality leader, reflecting elevated operating costs.
• Free cash flow of $892 M covers modest dividends but is burdened by high interest expense.
• Leverage is extreme: an 844% debt/equity ratio indicates substantial financial obligations, with enterprise value ($39 B) quadruple market cap ($9.6 B).
MGM Resorts by Praveen Thirumurugan
Competitive Position: Strength Abroad, Weakness on the Strip
MGM’s global diversification partly offsets domestic softness, but structural challenges persist:
Las Vegas Strip (59% of 2024 EBITDAR)
• Q2 net revenue: $2.1 B (−4% yoy); adj. EBITDAR: $710 M (−9%).
• Decline driven by a major room-renovation at MGM Grand and lower table-game hold.
Regional U.S. Operations (≈20% of 2024 EBITDAR)
• Q2 net revenue: $965 M (+4%); adj. EBITDAR: $309 M (+7%).
MGM China (21% of 2024 EBITDAR)
• Q2 revenue: $1.10 B (+8.9%); adj. EBITDAR: $320 M (+2.8%).
Digital & Sports Betting (BetMGM)
• Positive EBITDA in Q2; raised full-year 2025 guidance toward $500 M target.
Despite pockets of growth in Macau and online gaming, the flagship Las Vegas segment lags due to cost inflation, labor shortages, and discretionary spending cutbacks. Entry barriers—capital intensity, regulatory licensing—protect incumbents, but competition from Caesars, Wynn, and emerging regional casinos remains fierce. MGM’s scale advantage is undermined by its dated room inventory and heavy renovation costs.
Management & Governance: Strategic Efforts Undone by Execution Risk
CEO Bill Hornbuckle’s leadership has delivered marquee partnerships (Marriott, Cisco) and pipeline growth (Japan resort), but execution risks loom:
• Japan Integrated Resort (40% stake) won’t open until 2030, deferring returns.
• Marriott Bonvoy alliance expanded loyalty, yet new properties like W Las Vegas open late 2025, delaying revenue uplift.
• Share repurchases (8 M shares for $217 M in Q2) demonstrate capital return discipline, but debt reduction remains modest ($2.1 B remaining authorization).
Corporate culture emphasizes responsible gaming (1,900 GameSense advisors) and sustainability, yet high debt limits strategic flexibility. Governance is solid—no leadership turmoil—but operational oversight of large-scale projects is critical given past write-offs (CityCenter).
Risks & Opportunities: Macroeconomic Headwinds vs. Growth Catalysts
Risks
• Consumer Discretionary Pullback: U.S. credit card and auto-loan delinquencies rising; disposable income under pressure.
• Rising Capital Costs: Debt servicing remains onerous even as rates plateau.
• Regulatory Uncertainty: Gaming tax hikes or stricter credit laws in key jurisdictions could dent margins.
• Technical Downtrend: 5-, 10-, and 52-week trends are all weak; support near $29 risks breach if sentiment worsens.
Opportunities
• BetMGM Traction: Sports betting and iGaming expansion in North America and Europe.
• Asian Growth: Macau recovery and eventual Japan resort could add $3.9 B in sales by 2031.
• Real Estate Spin-Offs: Asset-light strategy via REITs may unlock balance-sheet value.
• Technology Partnerships: Cisco WPA and digital upgrades can lower long-run operating costs.
tl;dr
MGM Resorts is contending with narrow margins, extreme leverage (844% debt/equity), and shrinking core Strip profits. Although international resorts and BetMGM show promise, they cannot yet offset U.S. headwinds or cure high financing costs. Technical indicators point to sustained downside pressure from the $35.36 current price, with major support at $29. In light of macroeconomic uncertainties and execution risks on large-scale projects, the near-term outlook remains bearish.
