Analyst Note| Dan Wasiolek |
COVID-19 dealt no-moat MGM a hard hand in the second quarter, as its U.S. (79% of 2019 EBITDAR) and Macau (21%) resorts largely remained suspended, resulting in a 91% decline in sales (versus a 97% drop for narrow-moat LVS). Further, the recent reacceleration in COVID-19 cases has led to U.S. industry hotel occupancy and air passenger volumes stagnating in mid-July after roughly three months of steady improvement. Additionally, quarantine efforts in Macau have lingered longer than previously expected, leading us to lower our industry gross gaming revenue 2020 forecast to a mid-50% decline from a mid-40% drop prior. And although we still expect a full revenue recovery in Las Vegas and Macau by 2023 and early 2022, respectively, we still expect to reduce our $32 fair value estimate by around a mid-single-digit percentage, keeping shares at an attractive level.