Analyst projects quick rebound for MGM stock price after attack

A gaming analyst has issued a “buy” recommendation for the stock of MGM Resorts International, saying the cyberattack on the company will have minimal impact on the company.

In a report issued Sunday, equity analyst David Katz of New York-based Jefferies placed a target price of $69 a share on MGM stock. Midday Monday, shares were trading for around $37 a share.

“We view the cyberattack as a singular event that impacts 3Q23 and modestly 4Q23 estimates, with de minimis (minimal) impact on longer-term estimates,” Katz said in his report to investors. “Although we are adjusting our 2H23 (or second half of year) estimates to reflect the updated commentary from MGM, we expect the impact to be covered by insurance and 2024-2025 remain intact. Our fundamental thesis remains for a strong top line Las Vegas market with partially offsetting costs, improving digital and gradual Macao recovery.”

Katz cited MGM’s Securities and Exchange Commission report from Oct. 5 documenting the early-September cyberattack that affected MGM computer operations for nine days.

In that filing, MGM estimated a $100 million impact on cash flow and indicated it would have a one-time $10 million expense to pay for technology consulting fees, legal fees and other related expenses.

“This event for MGM, as well as peer (Caesars Entertainment Inc.), presents a set of issues on how companies deploy resources to mitigate risk,” the report says.

“In this instance, the event was the result of a single human error despite what we expect is considerable corporate focus on prevention training. Further, the presence of insurance provides risk mitigation for what is becoming increasingly commonplace in consumer businesses. Reflecting on the matter, we believe the issue should not have a lingering impact on MGM shares, the earnings are insured and the fundamentals of the market appear strong.”

Katz projected revenue and cash flow estimates of $3.53 billion and $1.039 billion, compared with $3.738 billion and $1.16 billion, prior to the cyberattack.

He said an anticipated windfall from November’s Formula One Las Vegas Grand Prix race should minimize any impact the cyberattack had. He added that looking ahead, the same effect should result from the Super Bowl game to be staged in Las Vegas in February.

“For Fiscal Year 2023, we are decreasing our estimates to $15.251 billion for revenue and $4.51 billion for (adjusted cash flow) from $15.461 billion and $4.642 billion prior. Our price target remains $69.”

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on X.