Your portfolios in brief
Founded in 1986, MGM Resorts International is a global company specializing in the management of leisure, gaming and hotel resorts. The company has a portfolio of 31 unique hotels and casinos, including some of the industry's best-known brands such as Bellagio, MGM Grand, Mandalay Bay and The Mirage. Present in several countries, MGM employs thousands of people worldwide and is a key player on the Las Vegas Strip as well as in Macau.
- Highlights in 2024
Annual guidance: MGM has raised its annual guidance on the back of strong demand at its Las Vegas and Macau resorts. Management anticipates continued growth, supported by the post-pandemic recovery and the expansion of online gaming and sports betting via its subsidiary BetMGM.
Sales for the quarter: The company reported sales of $4.38 billion for the first quarter of 2024, up 13.2% on the same period last year, exceeding analysts' expectations of $4.24 billion.
Product performance: MGM saw strong results from BetMGM, its online sports betting and gaming platform, which contributed significantly to revenues. MGM China also reported record performance, with casino revenues up 66% year-on-year.
Adjusted earnings forecast: MGM forecasts adjusted earnings of $6.50 per share for the year, beating Wall Street expectations and boosting investor confidence.
Performance versus Wall Street expectations: MGM exceeded Wall Street forecasts for the third consecutive quarter, reinforcing investors' positive perception of its ability to navigate an uncertain economic environment.
- Why is this a stock to watch?
MGM is one to watch due to its solid financial performance, the continued growth of its operations in Macau and Las Vegas, and its strategic initiatives to diversify its revenue sources. The company recently completed a significant share buyback program, demonstrating its confidence in its future prospects. In addition, pent-up demand in the hotel and gaming sectors should continue to support growth. MGM China, in particular, is benefiting from the upturn in travel to mainland China, which is boosting its revenues and market share in Macau. Tourist arrivals in Macau increased by 79.4% to 8.88 million in the first quarter of 2024, reaching around 86% of pre-pandemic levels, with mass gaming revenues reaching around 105% of 2019 levels
- Conclusion
In the long term, MGM's stock should find itself in a good position, particularly as potential rate cuts should further stimulate the sector. MGM's Macau casino division is doing well and will continue to generate solid profits thanks to the upturn in travel to mainland China. In addition, Las Vegas should see tourists return in droves and spend, reinforcing MGM's position as a leader in the entertainment and hospitality sector.
Analysts are generally optimistic about MGM's prospects, citing its ability to generate solid revenues despite economic uncertainties underscoring the company's resilience and potential for continued growth. MGM has shown solid gains of 35% from levels of $30 in January 2021 to around $40 currently, despite uneven performance over the years: returns of 42% in 2021, -25% in 2022, and 33% in 2023.
Market Brief
Monday
Dow: The index fell by 0.49% to close at 39,806.77 points.
NASDAQ: The index gained 0.65% to close at 16,794.88 points.
S&P 500: The broad index gained 0.09% to close at 5,308.13 points.
The Dow Jones came under notable pressure from the banking and energy sectors, sending it back below the symbolic 40,000-point mark, reached for the first time at the close last Friday. According to Spartan Capital's Peter Cardillo, this is a normal setback after crossing another important threshold.
No major macro-economic data influenced the session, and the week promises to be relatively quiet with the exception of the forthcoming publication of the minutes of the latest Federal Reserve (Fed) meeting. Several Fed officials, including Vice Presidents Michael Barr and Philip Jefferson, have indicated that interest rates will remain high for an extended period.
Stocks are coming off a strong week, with the S&P 500 recording a run of four consecutive weeks of gains and hitting all-time highs. The Dow Jones has also enjoyed five consecutive weeks of gains. Ten-year bond yields remained taut, settling at 4.45% versus 4.41% at the previous close.
- Stockss in brief
Nvidia (+2.49%): Nvidia shares were up to $947.80, thanks to optimistic forecasts and high expectations ahead of the release of its quarterly results. Demand for its AI chips continues to grow, pushing its market capitalization above the $2.3 trillion mark.
Microsoft (+1.22%): Microsoft shares were up, closing at $425.34. The group recently presented its first artificial intelligence-enhanced PCs, anticipating strong demand for these new products.
Chevron (-0.73%): Chevron shares were down 0.73%, closing at $159.97, due to lower crude oil prices and concerns about global energy demand.
Norwegian Cruise Line (7.56%): Shares jumped after the company raised its outlook for the year.
JPMorgan Chase (-4.46%): Shares in JPMorgan Chase fell to $195.66 after CEO Jamie Dimon hinted that his retirement may be imminent. In addition, the bank announced that it would not be buying back shares at current levels.
Royal Caribbean (4.07%): Shares followed the upward trend in the cruise sector.
Carnival (7.27%): The stock rose in response to positive news in the sector.
Tesla (-1.41%): The share price fell after the announcement of further price cuts in Europe.
Target (-2.14%): The retailer announced major promotions to clear out its inventories, sending the stock tumbling.
Macy's (-2.00%): The share price fell as we awaited quarterly results.
- Outlook for interest rate cuts by the Bank of Canada
Inflation in Canada slowed to a three-year low of 2.7% in April, after rising to 2.9% in March. This slowdown, despite higher gasoline prices, is mainly attributable to lower prices for food, services and durable goods. Headline inflation remains within the Bank of Canada's target range of 2% to 3% for the fourth consecutive month. However, housing prices continue to push inflation higher. Economists are expecting a possible interest rate cut as early as June 5, although some predict that the Bank of Canada could wait until July to confirm the sustainability of this trend.
A rate cut could send a positive signal to homebuilders and offer "a little oxygen" to the economy. The Bank of Canada, with its key rate at 5% since July 2023, must strike a balance between stimulating the economy and avoiding widening the gap with US rates, which could weaken the Canadian dollar and fuel imported inflation. Decisions taken in the coming weeks will be crucial for the Canadian economy, especially for the housing sector, which would greatly benefit from a rate cut at the start of its busiest season. The Bank of Canada is considering cutting interest rates in June or July to support the economy, although the gap with US rates remains a concern.
Tuesday
Dow: The index rose by 0.17% to close at 34,440.88 points.
NASDAQ: The index gained 0.22% to close at 14,780.80 points.
S&P 500: The broad index gained 0.25% to close at 4,450.18 points.
The VIX index, which measures investor anxiety, hit a five-month low on Tuesday, reflecting a light mood on Wall Street. However, the market is overheating after a series of new offerings from artificial intelligence giants, including Microsoft, Google and OpenAI, which have boosted the sector on the stock market over the past ten days.
- Stockss in brief
Tesla (6.66%): Tesla gained ground after announcing the mass production of its electric truck, scheduled for 2026.
Lowe's (-1.88%): Investors punished the stock despite good quarterly results, due to the continued decline in revenues.
Trump Media and Technology Group (-8.66%): The company fell after the publication of disappointing first-quarter results.
Nvidia (2.49%): Nvidia continued to climb in anticipation of its quarterly results.
Chevron (-0.73%): Impacted by lower oil prices, Chevron saw its shares decline slightly.
Microsoft (0.87%): Microsoft shares hit a new closing record thanks to recent announcements of AI-enhanced products. Its market valuation reached $3189 billion, an almost tenfold increase in ten years.
Alphabet (0.61%): Alphabet shares rose on optimism surrounding its AI innovations.
JPMorgan Chase (2.01%): JPMorgan shares rebounded after CEO Jamie Dimon's recent statements about his possible retirement.
Macy's (5.13%): Macy's shares surged after reporting better-than-expected quarterly results and raising its annual guidance.
Walmart (1.51%): Walmart shares gained on strong consumer demand for its low-priced products.
Wednesday
Dow: Down 0.51% to close at 33,308 points.
NASDAQ: Down 0.18% to end at 12,784 points.
S&P 500: Lost 0.27% to end at 4,126 points.
Indices retreated following the release of the Fed's minutes, indicating that interest rates could remain high for longer due to persistent inflation. Investors also took profits ahead of Nvidia's quarterly results, which contributed to the index decline.
Nvidia on standby
Investors were awaiting Nvidia's results, which added to market volatility. Nvidia shares edged down 0.46% as the market anticipated a significant impact of the company's results on the major indices.
Disappointing quarterly results
Target fell by 8.03% after reporting lower-than-expected results, citing the impact of inflation on consumer purchasing power. By contrast, Pinduoduo rose 1.13% on better-than-expected results, benefiting from demand for low-priced products.
- Stockss in brief
BuzzFeed (+20.40%): Vivek Ramaswamy's entry into the company's capital propelled the shares.
Lululemon Athletica (-7.23%): Dropped following the announcement of the departure of product manager Sun Choe.
TJX (+3.50%): Outperformed expectations thanks to the attraction of low prices and bargains.
Goldman Sachs (-1.71%): Dropped with pressure on financial stocks.
JPMorgan Chase (-0.61%): Dropped among financial stocks.
Thursday
Dow: Dropped 1.53% to close at 32,789 points.
NASDAQ: Down 0.39% to close at 12,734 points.
S&P 500: Lost 0.74% to end at 4,095 points.
The session was marked by a rise in bond yields following the publication of economic indicators showing a rebound in US economic activity. The yield on U.S. 10-year government bonds approached 4.50%, before falling back to 4.47%, from 4.42% at the previous day's close. The S&P Global composite index hit a 25-month high, fuelling fears of a more aggressive monetary policy from the Fed.
Better-than-expected economic data also drove the market lower on Thursday, as investors reduced their expectations for a September rate cut. Services and manufacturing data for May beat economists' forecasts, according to S&P Global purchasing managers' surveys released on Thursday. Initial jobless claims for the week ending May 18 were 215,000, compared with 220,000 forecast by economists polled by Dow Jones. These results reinforced investors' concerns about an imminent interest rate cut by the Federal Reserve.
Nvidia boosts the NASDAQ
Chipmaker and artificial intelligence leader Nvidia jumped 9.3%, taking its shares above $1,000, after announcing better-than-expected fiscal first-quarter financial results and a 10-for-1 stock split. Revenue forecasts for the second fiscal quarter, around $28 billion, also exceeded analysts' expectations of $26.61 billion. Analysts expected earnings of $5.95 per share.
Nvidia's results are crucial for Wall Street, as investors look for signs of continued enthusiasm around AI. With a market capitalization of over $2.5 trillion, Nvidia has a strong influence on the S&P 500.
Disappointment at Boeing
Boeing plummeted 7.55% after its CFO announced that the group no longer expected to generate cash flow for fiscal 2024. This announcement has heightened concerns about the financial stability of the company, already impacted by incidents and production problems. Having recently suffered several problems, including an in-flight incident on January 5, Boeing has seen its market capitalization fall by around a third since the start of the year.
Live Nation under pressure
Live Nation plunged 7.81% following a subpoena from the US Department of Justice for anti-competitive practices. The Biden administration is considering forcing a split between Live Nation and its subsidiary Ticketmaster to remedy these practices.
- Stockss in brief
Apple (-2.11%): Down with the general market trend.
Amazon (-1.14%): Down despite a volatile day.
Alphabet (-1.65%): Ended in the red.
Microsoft (-0.94%): Also fell, following the trend in the technology sector.
Ralph Lauren (+3.27%): Benefited from better-than-expected quarterly results.
VF Corporation (-3.22%): Impacted by a drop in Vans sales (-26%).
DuPont (+0.48%): Up after the announcement of a split into three listed entities.
Friday
Dow: The Dow Jones was up 0.23% on Friday morning.
NASDAQ: The NASDAQ index gleaned 0.47% at the start of the session.
S&P 500: The broad S&P 500 index gained 0.40% at the opening.
