MGM Resorts International (MGM) stock intrinsic value fair value estimate & owner earnings analysis

MGM Resorts operated 16 casino properties in the United States at the end of 2025 (the Las Vegas Strip plus regional casinos in places such as Detroit, Maryland, Massachusetts, New Jersey, New York and Mississippi), two casinos in Macau through MGM China, in which it owns about 56%, and online gaming through LeoVegas and a 50% interest in BetMGM. It has also committed to fund roughly 43.5% of an integrated resort being built in Osaka, Japan. The fact that drives everything is that MGM is a tenant of many of its biggest properties. It made about $1.87 billion of operating-lease payments in 2025 under long-term triple-net leases with fixed rent and annual escalators (the VICI master lease began April 29, 2022 with a 25-year initial term and three 10-year renewal options), and it expected $1.8 billion of cash rent over the following twelve months; the rent does not fall when business is weak. At June 30, 2026 it also had about $6.07 billion of borrowings (at year-end 2025, about $2.5 billion of the $6.3 billion principal was at MGM China) plus about $213 million of finance leases. We do not count the roughly $24 billion of operating-lease obligations as debt, because the rent is already deducted from the cash flow we value. Earnings level. Our cash-flow measure (cash from operations, less working-capital swings, stock compensation and maintenance capital spending) was $1.68 billion in 2023, $1.43 billion in 2024 and $1.50 billion in 2025. The value is built on the cash the business produces before paying lenders, which adds back cash interest: $2.13 billion, $1.84 billion and $1.89 billion. The 2025 figure is flattered: the company received net cash income-tax refunds of about $35 million after finishing an IRS examination of its 2015-2019 returns, versus taxes paid of about $267 million in 2024 and $344 million in 2023. Restating 2025 at the average of those two years gives about $1.55 billion. We use the median of 2023-2025 on that basis, $1.84 billion, and start the window at 2023, the first full year under the current lease structure. Roughly $0.94 billion of this is Macau and $0.90 billion the rest; the filings do not show cash flow by segment, so that split is our estimate (segment profit less segment capital spending). What the segments show. Las Vegas Strip segment profit was $3.19 billion in 2023, $3.11 billion in 2024 and $2.86 billion in 2025, on revenue that fell about 4% in 2025 to $8.44 billion. Regional operations were steady at $1.13 billion, $1.14 billion and $1.16 billion. MGM China rose from $0.87 billion to $1.09 billion to $1.20 billion. The digital segment lost roughly $90 million in 2025 (implied by the reported totals). In the first half of 2026 net revenue was $8.91 billion (up 2.6%) and operating income $805 million versus $790 million; operating cash flow was $1.13 billion versus $1.19 billion, with capital spending lower ($396 million versus $496 million). That does not show further deterioration, and it is not enough to move our level. In 2025 the cash flow before lenders grew 2.7% as reported (about 16% lower after the tax-refund adjustment); our base case assumes about 2% lower in its first year, so it does not assume a reversal of the trend. Accounting judgements. Stock compensation is treated as a real cost. Non-cash charges such as the $279 million goodwill write-off in 2025 (including $256 million at Empire City after the company withdrew its application for a commercial gaming license there) and a $288 million foreign-currency loss are not deducted. Capital spending tied to revenue growth was excluded from the deduction; it was small ($18 million in 2025). We treated the Northfield Park sale ($546 million agreed in October 2025, with $53 million of annual rent leaving with it) as value-neutral: the first-half 2026 cash flow shows about $507 million of sale proceeds, which we take to be that sale; we left the proceeds out of cash and left Northfield's earnings in. We set aside $1.0 billion of the $2.55 billion of cash as needed to run the casinos (the company says it needs cash on hand but does not give a figure). Senior note coupons run from 4.625% to 7.125%, close enough to our valuation rate that we made no adjustment for the cost of debt. Future cash flows are discounted at 6% a year. Base case. Las Vegas and regional operations hold at the 2023-2025 median level in dollars with no growth credited: Las Vegas profit has fallen two years running, we see only two years of regional growth, and we have no named evidence of pricing power. Rent, however, rises 2% a year ($37 million in the first year, growing), so U.S. cash flow shrinks from about $0.9 billion to about $0.5 billion in ten years and to roughly nothing around year 20. Macau holds at about $0.94 billion a year until the concession ends on December 31, 2032, when, unless extended, the casino premises and gaming equipment pass to the Macau government without compensation; no renewal is secured, so nothing is counted after 2032. For Osaka we subtract the remaining commitment of about $2.2 billion (JPY356.9 billion, about $2.3 billion at year-end 2025, funded quarterly through 2028, less up to roughly $0.14 billion of equity-investment payments shown in the first half of 2026) and credit no earnings: the plan is government-certified and construction has begun, but the filings give no earnings figure for it. BetMGM's announced intention to distribute excess cash is also not credited because no amount is stated. The business is worth about $11.5 billion ($6.4 billion U.S., $5.1 billion Macau). It owes $5.2 billion of net borrowings and finance leases, $2.2 billion for Osaka, and about $1.4 billion to the minority owners of MGM China (44% of its value after its own debt). The difference is about $2.7 billion, or $10.31 per share on 257.8 million diluted shares. Bear case. The U.S. business starts from its weaker underlying 2025 level of about $0.54 billion (after removing the tax refunds), and we assume lease escalators run at 3% from 2033, because some leases move from a fixed 2% to the greater of 2% and inflation, capped at 3%. In years 4 to 6 we repeat the 2020 shutdown using MGM's own record: revenue fell from $12.9 billion in 2019 to $5.2 billion in 2020, and cash before lenders went from +$2.2 billion to -$0.6 billion, then +$1.5 billion in 2021 and +$1.4 billion in 2022. We apply the actual dollar swings against normal (-$2.75 billion, -$0.69 billion, -$0.80 billion), not scaled up for today's larger size, split 74% U.S. and 26% Macau by revenue. Macau still ends in 2032 and Osaka is charged as in the base case. The business is then worth about $4.2 billion, almost all Macau. It owes $5.2 billion of net borrowings and finance leases, $2.2 billion for Osaka and about $1.0 billion to Macau minority owners. In this case the company owes roughly $4.2 billion more than the business is worth, or about -$16.34 per share, meaning shareholders would be left with nothing. The $2.3 billion revolving credit facility was undrawn at year-end 2025, which would fund the cash burn for a time, but not protect the shareholders' claim. Near-term maturities matter here: at year-end 2025 there were $1.15 billion of notes due in 2026 and $1.425 billion due in 2027, and the first-half 2026 cash flow shows $750 million borrowed and $750 million repaid. Bull case. Las Vegas Strip profit returns to its 2024 level of $3.1 billion, a level reached only one year before 2025, and profit growth then offsets rent escalators, so U.S. cash flow holds at about $1.15 billion for 25 years. The Macau concession is renewed to 2042 with cash flow holding at its 2025 level of about $1.0 billion after capital spending; MGM was awarded a new concession in the December 2022 tender, and MGM China segment profit rose about 11% in 2025. We credit nothing for Osaka earnings or BetMGM. The business is worth about $25.8 billion, owes $5.2 billion, $2.2 billion for Osaka and about $3.8 billion to Macau minority owners, leaving about $14.6 billion, or $56.46 per share. How we set the margin-of-safety price. We are moderately, not highly, sure of the earnings level: it rests on a three-year median, but the 2025 level without tax refunds is about 16% below it and Las Vegas profit has fallen about 10% in two years. The worst plausible outcome is another shutdown or deep downturn while $1.8 billion of annual rent cannot be reduced, with maturities to refinance and about $2.2 billion still to fund in Osaka, on which MGM also gives an uncapped guarantee to fund completion. The structure would not protect shareholders in that outcome: the rent is fixed and rising, and the lenders rank ahead of them. If we are wrong about the things that matter most, the base value moves a lot: if Las Vegas keeps eroding so that U.S. cash flow starts at $0.54 billion instead of $0.90 billion, it falls by about $14.50 a share to below zero; if the Macau concession is renewed for ten years beyond 2032, it rises by about $10.60; if Osaka earns back at least its cost, it rises by about $8.50; and if Las Vegas profit grows enough to offset the rent escalators, it rises by about $21. That range is why the price must be low. The price assumes a holding period of five years or more; during that period, returns to shareholders have come mainly through share repurchases ($1.2 billion in 2025, with $1.6 billion of authorization left at year-end). Playing out the base case with borrowings repaid in equal installments over 15 years, the base case implies about 20% a year from roughly $6 a share; the margin-of-safety price is $5.00, to leave room for the risk that Las Vegas has not stopped slipping and for the bear outcome, where the shares are worth nothing. What we could not reconcile. The cash-flow statement does not show the change in lease liabilities separately, so it may sit within the working-capital lines we remove. Distributions to minority owners were $169 million in 2025 in the cash-flow statement, versus about $122 million of MGM China dividends paid to its minority holders; we did not determine the difference. Earlier estimates for MGM were prepared on a different basis and are not comparable with these figures.