What happened
Shares of casino operator MGM Resorts International (NYSE: MGM) rose as much as 6.5% in the first hour of trading on Thursday. While today’s progress is nice to see, it’s important to remember that the stock is still down to 30% for the year to 2020. Which, if you step back and look at the big picture, helps explain why investors were so excited about two bits of news today.
So what
The backstory here is centered around COVID-19, leading governments to shut down non-essential businesses such as casinos earlier this year in an effort to slow the rapidly spreading virus. As if closing in on violence is not bad enough, the dragging influence can be just as difficult to deal with as people actively practicing social distance. Casinos are specially built to bring large numbers of people, often seniors at risk, long close together. These are conditions in which the coronavirus has been proven to be easily spread. MGM is facing rising costs, including for cleaning, and limited staffing as it works to reopen for business. The US fell into a recession in February and casinos are cyclical companies, so there is currently very little good for this sector.
Image Source: Getty Images.
That said, MGM Resorts’ Mirage casino in Las Vegas will reopen today. Although things are not nearly back to pre-COVID-19 levels, displaying this prominent property is an important step in the normalization process. Investors were probably happy with the news. However, MGM also announced that it had opened BetMGM operations in West Virginia. This is the online gaming company that makes it possible to serve lovers of gambling while sitting safely in their own home. Effectively, it is an additional source of income that can help to compensate for the pain at the physical locations of the casino operator. This was probably another net positive for investors.
Well what
MGM Resorts International does its best in a very bad situation. While the Mirage reopened and online gaming began in one state, not just big steps forward, they are important. Investors today are clearly focusing on the positive.
