MGM Resorts has more room to run on resilient Las Vegas tourism, JPMorgan says

JPMorgan has reiterated its bullish stance on MGM Resorts International (MGM), arguing that the casino and hospitality giant still has significant upside despite a recent rally. The bank set a price target of $48, implying roughly 10% upside from current levels, driven by resilient tourism trends in Las Vegas that have not buckled under macroeconomic pressure. This optimism is grounded in the Fed model, which compares earnings yield to Treasury yields; with MGM's forward earnings yield near 7% versus the 10-year Treasury yield around 4.5%, the stock offers a risk premium that historically supports equity valuations. Additionally, MGM's forward P/E of approximately 14x is below its 5-year average of 17x, suggesting room for multiple expansion if earnings hold.

MGM Resorts shares rallied sharply on Wednesday, but JPMorgan believes the stock still has room to run. The bank's analysts point to steady visitor volumes and strong spending in Las Vegas, which have held up better than expected. For equities traders, this resilience in a key leisure market signals that consumer discretionary spending remains robust, supporting the broader sector. Breadth indicators show that the S&P 500's consumer discretionary sector has seen improving participation, with 60% of stocks trading above their 50-day moving average, while sector rotation has favored travel and leisure names as investors seek exposure to domestic tourism. MGM's buyback yield of 4.5% also provides a floor, as the company has aggressively repurchased shares, reducing float and boosting EPS. Options-implied volatility on MGM has declined to 30% from a 2024 high of 45%, indicating that the market is pricing in less uncertainty around near-term earnings. Traders can track MGM's price action on NowPrice's live stocks dashboard to monitor the move.

Looking ahead, investors will watch for monthly Las Vegas visitor data and MGM's upcoming earnings report. Any signs of softening in tourism could test the thesis, but for now, JPMorgan sees a favorable risk-reward. The stock's valuation also appears reasonable relative to historical multiples, providing a cushion against downside. Key catalysts include the Super Bowl and March Madness events, which typically boost foot traffic and gaming revenue. If the Fed pivots to rate cuts, lower discount rates could further support MGM's valuation, as the earnings yield gap widens. Conversely, a recession or a spike in unemployment could pressure consumer spending, making the next few months critical for the stock's trajectory.