Posted on: November 30, 2021, 12:40h.
Last updated on: November 30, 2021, 01:47h.
MGM Resorts International (NYSE:MGM) stock is a favorite among retail investors, and that could be a catalyst for upside in the casino giant’s shares, according to one research firm.
MGM is a favorite of retail investors. That could be a catalyst for the stock. (Image: David Paul Morris/Bloomberg)
UBS recently noted that there are correlations between stocks adored by smaller investors and out-performance by those names of broader equity benchmarks over the next several months. MGM makes the bank’s list of 16 stocks with retail signal scores ranging from 96 percent to 100 percent. The Bellagio operator scores 96 percent.
UBS research indicates the names in the top percentile beat those in the bottom two percentiles by 5.5 percent over the upcoming three-month span.
Retail participation remains elevated despite the lapsing of stimulus and reopening of the economy,” UBS equity strategist Keith Parker said.
MGM is the only gaming equity on the UBS list, and its appearance in that group comes as the shares are testing investors’ patience. The Mandalay Bay operator is recently following the broader gaming complex, shedding 12.43 percent over the past month, and residing at its lowest levels since September.
Retail Investors Matter
There was a time when ordinary investors were an afterthought in financial markets. But thanks to advances in technology and younger demographics’ penchant for taking flyers on beaten-up stocks, retail investors have more clout than ever.
Names such as GameStop (NYSE:GME) and movie theater chain AMC Entertainment (NYSE:AMC) are epicenters of battles between retail traders and their professional counterparts, including hedge fund managers. Via the Reddit forum WallStreetBets, or WSB in social media parlance, traders supposedly banded together to drive up the price of moribund video game retailer GameStop.
To be sure, MGM isn’t comparable to those stocks, which benefited from short squeezes. The casino operator’s fundamental outlook is significantly brighter, and due to a recent spate of asset sales and other transactions, the company’s cash stockpile could reach or exceed $9 billion. That’s an impressive sum for a company with a market capitalization of $19.31 billion.
While MGM is unlikely to become a battleground on par with AMC or GameStop or post rapid gains similar to those names, the gaming equity still offers more than 41 percent upside to consensus price target of $55.17.
MGM Not Only Gaming Stock Retail Loves
MGM is the only gaming equity on the aforementioned UBS list, but the industry is a favorite of smaller investors.
Dating back to 2020, retail investors showed affinity for an array of iGaming and sports betting equities, as well as a slew of special purpose acquisition companies (SPAC) in the gaming landscape.
More recently, data indicated smaller investors stepped into Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) after those stocks tumbled amid fears Macau will unleash tighter regulations on gaming operators.