MGM Resorts International is expected to rely heavily on its online gambling platform BetMGM to drive growth in 2025, according to a recent note from Deutsche Bank. Analyst Carlo Santarelli highlighted a shift in investment focus toward digital operations as MGM’s brick-and-mortar casino business faces challenges in sustaining revenue growth.
Santarelli’s analysis forecasts MGM’s strategy to boost revenue through incremental fee increases and new digital ventures. The move comes as traditional gaming operations, particularly in Las Vegas, encounter headwinds from rising costs and heightened competition.
Deutsche Bank’s report points to MGM’s recent fee adjustments as a contributor to expected revenue growth in 2025. In December, the company increased resort fees at its Las Vegas properties by $3 to $8 per night, a move that Deutsche Bank estimates will add approximately $70 million in incremental net revenue.
Santarelli also noted that MGM is exploring additional ways to generate revenue through creative strategies, including tiered seating in restaurants. While these measures may not notably impact top-line revenue, Santarelli suggested they could enhance profitability through high-margin opportunities.
Deutsche Bank’s note emphasizes BetMGM as a key driver of MGM’s future growth. The joint venture with Entain has been a key part of MGM’s digital expansion, offering both online casino games and sports betting. Santarelli believes MGM will prioritize transparency around BetMGM’s performance, providing investors with clearer reporting metrics in 2025.
Santarelli suggested that MGM may seek to consolidate its BetMGM operations further, potentially buying out a portion of the joint venture to gain greater control over the business. He drew a comparison to MGM’s strategy in 2011 when the company increased its stake in MGM China from 50% to 51%, which was positively received by investors at the time.
While MGM’s digital ventures are gaining momentum, its traditional casino operations face challenges. Santarelli highlighted that MGM’s Las Vegas Strip properties require a 3% annual net revenue growth to maintain flat property-level earnings before interest, taxation, depreciation, amortization, and rent (EBITDAR) margins.
MGM China, which had been outperforming peers earlier in 2024, saw its revenue growth slow in the second half of the year. Deutsche Bank expects further margin pressure in 2025 due to rising operating expenses associated with new amenities.
“Given what we expect will be a challenged fourth-quarter margin result, we believe 2025 property margins are likely to come into focus in conjunction with the fourth-quarter earnings result,” Santarelli noted.
MGM has been proactive in returning capital to shareholders through stock buybacks throughout 2024. Santarelli expects this strategy to continue into 2025, with MGM capitalizing on favorable buyback conditions.
The company’s capital expenditure is also expected to increase in 2025, including maintenance projects such as renovations at MGM Grand Las Vegas and potential investments in its Japan and New York initiatives.
Should MGM secure a full casino license for Empire Resorts in New York, the company would be required to pay a $500 million license fee and fund facility upgrades.
Deutsche Bank’s $48 price target for MGM is based on a sum-of-the-parts valuation model. The firm values MGM’s domestic operations, international assets, and digital ventures separately, attributing significant weight to the BetMGM platform.
Original article: https://www.yogonet.com/international/news/2025/01/03/90603-mgms-2025-outlook-could-hinge-on-betmgm-as-deutsche-bank-highlights-digital-pivot
