Hook / Thesis
Put simply: the chips are lining up for MGM. The company reported a solid Q2 2025 quarter (filed 07/30/2025) with meaningful operating cash flow, and the business mix - where the Las Vegas Strip still supplies ~59% of EBITDAR and Macao another ~21% - is generating resilient cash that can support optionality. At the current price (last trade 02/05/2026: $35.70), the stock looks like an attractive tactical long given near-term catalysts and a modest EV/EBITDA multiple after a rough 2024-early-2025 reset.
This is an upgrade to a long stance. I’m presenting a concrete trade plan (entry/stop/targets) sized for a medium-risk, swing-to-position thesis (3-9 months). The trade assumes patience for asset monetization and continued margin recovery across Strip, regional and Macao operations.
Business snapshot - what MGM does and why the market should care
MGM Resorts International is the largest operator on the Las Vegas Strip with ~37,000 rooms and a diversified footprint that includes U.S. regional casinos and a 56% stake in MGM China. By my read of the economics disclosed, the Strip still dominates profitability - roughly 59% of 2024 EBITDAR - with regional U.S. assets in the low-20% range and Macao at ~21% of 2024 EBITDAR. I estimate a Japan resort remains a late-cycle optionality (company estimate: a resort opening in 2030).
Why the market should care: MGM is a cash-generative asset operator with large, monetizable real estate and an operating platform that benefits from tourism recovery, premium pricing on the Strip, and scalable i-gaming/sports revenue via BetMGM (currently a high-single-digit percentage of total revenue but with upside optionality). That cash generation matters because it supports reinvestment, potential asset sales, and debt paydown in a capital structure that still has a lot of moving parts.
Recent financial signal: what the numbers show
Q2 2025 (period 04/01/2025 - 06/30/2025, filed 07/30/2025):
- Revenue: $4.4049 billion for the quarter.
- Operating income: $404.6 million.
- Depreciation & amortization: $241.98 million.
- Net income (continuing operations after tax): $118.09 million; net income attributable to parent $48.95 million; basic EPS $0.18.
- Net cash flow from operating activities (quarter): $645.87 million.
- Balance sheet snapshots: assets $41.699 billion; long-term debt $6.205 billion; equity attributable to parent $2.974 billion; other noncurrent liabilities roughly $28.584 billion (these are large and warrant attention).
How I interpret the math: add back D&A to operating income and Q2 adjusted EBITDA proxy ≈ $646.5 million (404.6 + 242.0). Annualizing that simple quarter gives a rough EBITDA run-rate of ~2.59 billion. Using diluted average shares of ~275.6 million and a last trade price of $35.70 implies an approximate market capitalization of ~$9.85 billion (275.6M * $35.70). Add long-term debt (~$6.21B) to arrive at an enterprise value proxy of ~$16.06 billion. That implies an EV/EBITDA in the neighborhood of ~6.2x on a simple annualized basis (a rough calculation but directionally meaningful).
Put another way: the company generates strong quarterly operating cash flow (Q2: $645.9M). Simple annualization suggests operating cash flow capacity that can support leverage management and asset optionality.
Valuation framing
My rough math gives a market-cap estimate of ~$9.8–9.9 billion and an EV of roughly $16 billion. Compared to the EBITDA proxy above, MGM looks reasonably valued at current levels — not cheap enough to ignore macro risk, but cheap enough relative to cash generation and asset optionality to warrant a tactical long.
Qualitatively: gaming operators tend to trade on earnings power, real estate optionality and regulatory catalysts. MGM's Strip dominance and materially positive operating cash flow mean the company is not hostage to a single market. That said, valuation is sensitive to (1) Macao/regulatory events, (2) interest rates and financing costs, and (3) discretionary consumer strength.
Trade idea - actionable plan
Thesis: buy MGM on strength around $34.50-$36.50 as a tactical long that plays the company’s operating-cash-flow resilience and asset optionality. Use tight risk controls because balance-sheet items are large and structural leverage is meaningful.
- Entry: $34.50 - $36.50 (lean towards better execution near the lower end).
- Initial stop: $31.50 (about 9-10% below entry midpoint); conservative traders can use $30.50 for a larger buffer.
- Primary target (near-term, 3-4 months): $42.00 (roughly +18% from current price) - reasonable if catalysts materialize and street sentiment improves.
- Stretch target (medium-term, 6-9 months): $50.00 (roughly +40%) - contingent on successful asset monetization, buyback/returns, or better-than-expected i-gaming growth.
- Position sizing note: treat this as a medium-risk allocation; given leverage and cyclicality, limit to a size consistent with a portfolio-level stop-loss of no more than 2-3% of capital.
Catalysts to monitor
- Asset monetization/news around sale/leaseback or disposition of non-core holdings - these events can move the valuation because they materially change net debt or unlock value for shareholders; recent media chatter around asset deals is consistent with the company's option set.
- Better-than-expected seasonality in Las Vegas Strip metrics and ADRs (average daily rates) - the Strip remains ~59% of EBITDAR and disproportionately moves profit.
- BetMGM outcomes and regulatory wins/expansion in new states - even as a smaller revenue contributor today, it's a scalable margin lever over time.
- Macao recovery/stability - Macao was ~21% of 2024 EBITDAR; signs of recovery or regulatory clarity would be a positive.
- Debt refinancing or visible reduction in long-term liabilities - any concrete commitments to reduce the ~6.2B long-term debt line or to cut other non-current liabilities would be a de-risking event.
Risks and counterarguments
Be honest about why this trade could fail. Below are primary risks and a short counterargument to my upgrade:
- High noncurrent liabilities / leverage: the balance sheet shows long-term debt ~$6.21B but other noncurrent liabilities near $28.6B. That structural leverage and obligations mean downside can be amplified if cash flow weakens.
- Macao/regulatory risk: a meaningful portion of profitability comes from Macao (~21% of 2024 EBITDAR). Any regulatory shock there or broader China tourism headwinds would hit results.
- Consumer cyclicality and Strip concentration: the Strip supplies roughly 59% of EBITDAR. An economic slowdown or sustained decline in tourism/large-group conventions would pressure margins quickly.
- Execution risk on asset monetization and capital returns: the thesis partly relies on management unlocking non-core value. If markets are unfavorable and deals are delayed, multiple expansion won’t happen quickly.
- Interest-rate sensitivity: higher-for-longer rates increase refinancing costs and could compress EV multiples for capital-intensive operators.
Counterargument to the upgrade: One could argue MGM is too levered and too exposed to Macao to be upgraded — a relatively modest disappointment in tourism or a delay in asset sales could justify a lower multiple. If you prioritize balance-sheet purity, this is not the trade for you.
What would change my mind
- I would downgrade if operating cash flow meaningfully falls from the Q2/2025 levels (Q2 operating cash flow: $645.9M) on a sustained basis, or if operating income trends down for two consecutive quarters.
- I would also change the view if management revises guidance away from debt reduction or asset-monetization plans, or if Macao experiences a regulatory shock that meaningfully reduces contribution to EBITDAR.
- Conversely, I would become more bullish if MGM announces a credible, near-term monetization that meaningfully reduces net debt or commits to buybacks/dividend policy funded by non-core proceeds.
Bottom line / stance
I’m upgrading MGM to a tactical long (swing-to-position, 3-9 months) at current levels with the trade parameters above. The combination of solid reported operating cash flow (Q2 2025: $645.9M), a reasonable EV/EBITDA proxy (~6.2x on my simple run-rate math), and real estate/operational optionality makes the risk/reward favorable—provided you respect the balance-sheet and put a disciplined stop in place.
Keep an eye on Macao metrics, Strip ADR and occupancy, and any announced asset transactions. Those three levers will determine whether the stock reaches the $42 and $50 targets or violates the suggested stop.
Disclosure: This write-up is for informational purposes and not investment advice. Trade size and stop levels should be adjusted to individual risk profiles.