Analyst downgrades MGM Resorts, cuts estimates after Las Vegas attack

Key Points
  • Susquehanna Financial Group downgraded MGM Resorts and cut its price forecast for shares of the resort company after a mass shooting outside an MGM-owned hotel in Las Vegas.
  • The Susquehanna analyst cited in her report the effects of previous tragedies on hotel bookings and room pricing as well as increased marketing costs.
Vehicles drive past the New York-New York Hotel & Casino, left, and MGM Resorts International Grand Hotel & Casino in Las Vegas, Nevada.
Andrew Harrer | Bloomberg | Getty Images

Susquehanna Financial Group downgraded MGM Resorts and cut its price forecast on the casino resort operator's shares after the recent attack in Las Vegas, but remained positive on the company in the long term.

Susquehanna analyst Rachael Rothman cited the possibility for occupancy and pricing shifts in the near term, based on historical patterns. She lowered her estimate for earnings per share by a penny for 2017 and by 14 cents for 2018.

"As time passes, we are confident U.S. consumers and the dedicated employees at MGM will demonstrate their resiliency and business will rebound," Rothman wrote. "But for now, we see heightened risk of negative revisions to estimates and are downgrading our rating on the shares from Positive to Neutral."

At least 59 people were killed and 527 injured after a gunman opened fire on more than 22,000 concertgoers who were gathered at a festival across the road from the MGM-owned Mandalay Bay hotel, police said Monday, in what was the deadliest mass shooting in modern U.S. history.

"Our hearts and prayers go out to the victims of last night's shooting, their families, and those still fighting for their lives," said Jim Murren, MGM's chairman and CEO, in a statement after the attack. "We are working with law enforcement and will continue to do all we can to help all of those involved."

Rothman cited the effects of previous tragedies on hotel bookings and room pricing in her report. Following the terrorist attacks of Sept. 11, 2001, lodging and cruise stocks traded off as much as 36 percent, according to the report.

"Stock reactions to past tragedies have ranged from 8 percent to 36 percent," said Rothman. "The risk to MGM's share will ultimately be most heavily tied to the magnitude and duration of pricing/occupancy shifts, and increasing marketing costs."

Since the attack, shares of MGM have fallen more than 5 percent and were set for another day of losses in premarket trade Tuesday morning.

While Susquehanna remains positive on MGM in the long term, it reduced its 12-month price forecast on the casino owner's shares to $33 from $38. The new price forecast is 7 percent higher than Monday's closing price. Her new EPS estimate for this year is $1.28 and for next year $1.27.

Susquehanna also cut its price forecast on Wynn Resorts following the shooting, lowering Vegas estimates "across the board."

"It is too early to assess the impact of the tragedy on forward bookings, pricing, and cancellations, but as we have been tracking Las Vegas room rate data for nearly two decades, we should begin to have a better sense for the pace of potential cuts within the next week or two," Rothman said.