Short/Sell MGM

by Wickedwally1

Someone recently posted about MGM being overpriced, I’ll add to that.

Today Nevada Governor announced new restrictions. Max capacity of casinos, bars, and restaurants are going from 50% to 25% starting Tuesday.

December is generally our slow season, and to add covid restrictions we had our occupancy projections pretty low. (17-25% on the weekdays, 40-60% on weekends).

With the surge, we’ve had massive cancellations. New projections have us around 5-10% occupancy during the week, 30-40% on weekends. This forced MGM to close 2 more casinos during the week (mirage and mandalay bay, in addition to Park MGM that was already weekends only.) We’re closing more restaurants and lowering operating hours for those that remain open.

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Vaccine news seems to have given MGM a massive bump, but here’s the real deal. The vaccines, at best, won’t be widely distributed till summertime. Most of MGM’s profit is earned during the peak convention season of January-May. All those massive conventions have canceled, CES included.

Summertime is very slow for Vegas, even pre-covid. Oct+Nov are usually decent, but then December is bad again.

2021 is dead on arrival for MGM resorts and all other Vegas casinos.

The massive run up to 26/27 made no sense.

Positions: 12/4 $25 Puts. I got in on Friday when MGM was trading at 27.

Edit to say this is my first DD, hope I did it right.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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