MGM Resort's shares downgraded by analyst to Hold

MGM Resorts International's stock price rose by 15% last Friday, however, there is one gaming analyst who is not convinced by this and sees problems ahead for the Las Vegeas casino giant. Robert LaFleur a gaming analyst from Hudson Securities said in a research note to investors before the opening of trade on the New York Stock Exchange on Monday that the rise in price was only due to the good casino revenues reported for March by Nevada gaming regulators.

MGM Resorts operates 10 hotel-casinos on the Strip and their gaming revenues in March were up 21.1%. According to LaFleur it was this news that caused their share prices to rise. On Monday MGM Resorts share prices fell by 0.8%.

LaFleur said, "Given MGM's lingering balance sheet challenges, we find it hard to imagine a scenario where the shares stage a sustainable and meaningful breakout from these levels. The strong March data is a positive development, but it doesn't negate MGM's lingering balance sheet issues."

He went on to say that the casino operator's biggest problem is $13 billion of long term debt. According to the MGM Resorts Chairman and Chief Executive Officer Jim Murren, paying off debts is the management's main priority and they are exploring different methods to achieve it.
At present MGM Resorts are planning to launch on the Hong Kong Stock Exchange by the end of the year which could bring in as much as $500 million. However, LaFleur told investors that the IPO may not be enough. He thinks that future debt refinancing will come with higher interest rates than the debt which is replaced. Now LaFleur has downgraded the company's shares from a Buy to a Hold. He expects the financial challenges to prevent the shares from gaining any more real value from this point.