MGM has remained unwavering in its dedication to share repurchases, boasting an impressive trailing 12-month yield buyback rate of 18%
MGM Resorts International is poised to emerge as one of the frontrunners in share repurchasing this year, according to financial analysts at Goldman Sachs. The renowned casino operator’s consistent dedication to buying back its own shares has earned it a coveted spot in Goldman’s buyback basket, a significant indicator of market confidence.
Amidst a backdrop of fluctuating market conditions, MGM stands out as a beacon of stability, particularly in the consumer discretionary sector. The company’s commitment to share repurchases has been steadfast, with its trailing 12-month yield buyback rate standing at an impressive 18%, trailing only behind General Motors within the consumer cyclical space.
Despite a slight downturn in share repurchase activity among S&P 500 companies last year, attributed in part to high-interest rates and a 1% tax on buybacks, MGM has remained undeterred. In fact, the company’s resilience in the face of these challenges positions it as a potential standout performer in the realm of share repurchases for the current fiscal year.
In the third quarter of the previous year alone, MGM repurchased shares worth $572 million, followed by an additional $629 million in the fourth quarter, bringing its total buyback tally for 2023 to an impressive $2.3 billion.
The significance of MGM’s buyback strategy extends beyond mere financial metrics. Share repurchases are often regarded as a tax-efficient means of returning capital to shareholders, especially in comparison to traditional dividends. Notably, MGM has refrained from reinstating its quarterly payout, opting instead to focus on maximizing shareholder value through repurchasing its own stock.
Goldman Sachs analyst David Kostin pointed out that despite a decline in buyback activity across the broader market, cash spending by S&P 500 companies saw a modest 4% increase last year. This growth, fueled by a surge in research and development spending and a notable uptick in mergers and acquisitions, underscores the resilience of companies like MGM amidst challenging economic conditions.
Looking ahead, market observers anticipate a potential rebound in buyback activity for the current fiscal year, with signs indicating that other casino operators may follow suit. MGM’s inclusion in the NASDAQ US BuyBack Achievers Index further underscores its commitment to reducing shares outstanding, solidifying its position as a leader in shareholder value optimization within the gaming industry.
Despite recent declines in MGM Resorts International’s stock, expert analysts are optimistic about its future. Vitaly Umansky of Seaport Global maintained a “Buy” rating with a target of $56.00, while Stephen Grambling from Morgan Stanley upgraded the stock to Equal-Weight with a target of $46.00. Ben Chaiken of Mizuho also gave a “Buy” rating with a target of $61.00. Additionally, Schaeffer’s Investment Research predicts a near-term rebound, citing historical data indicating a 67% chance of the stock finishing higher with an average gain of 4.4% within a month.
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