MGM Resorts International Faces Cyberattack, Analysts Optimistic

MGM Resorts International, a leading name in the world of gaming, hospitality, and entertainment, faced a cyberattack in September that disrupted its services. The attack affected the company's booking system, electronic door access, and certain gaming amenities, including slot machines. Notably, MGM decided not to give in to the hackers' demands for ransom, choosing instead to combat the threat independently.

The cyberattack had immediate consequences for MGM's stock performance, causing a drop in its stock value to approximately $36. Despite this setback, one analyst remains optimistic about the company's future. Carlo Santarelli, an analyst from Deutsche Bank, asserted that the cyberattack only briefly impacted MGM's performance and that the stock is currently undervalued.

Carlo Santarelli emphasized that MGM's stock is currently trading at a bargain price. Deutsche Bank's assessment of the company's target stock price remains high, with a minor decrease from $57 to $56. This assessment takes into account the recent cyberattack and precedes the release of MGM's third-quarter results, which are expected on November 8, 2023.

MGM has already confirmed that the cybersecurity incident will impact its Q3 2023 earnings, with an estimated reduction of around $100 million in adjusted EBITDAR for September. However, Santarelli explained that the one-time expenses related to the breach, estimated at less than $10 million in the third quarter, are not expected to affect adjusted EBITDAR as they will be covered by insurance.

Santarelli also discussed the impact of the cyberattack on MGM's third-quarter results. While the incident significantly affected September's figures, he pointed out that July and August's performance remained relatively stable. Occupancy rates dipped to 88% in September, compared to 93% during the same period in 2022. However, October's performance is expected to recover, with an anticipated occupancy rate of 93%, just slightly below the October 2022 result of 94%.

In conclusion, Santarelli stated, "The deceleration in the third quarter, however, was largely a result of September performance and we believe primarily relates to the cyber-security incident, as well as the reporting of GGR related to the incident."

David Katz, another equity analyst, also expressed optimism about MGM's recovery from the cyberattack. He predicted that the company's stock would rebound to $69 in the near future, emphasizing that the cybersecurity issue is unlikely to have a long-term impact on the business.