MGM Resorts (MGM): Japan's First Casino and a 7-Year Return Table

Buybacks and Japan make MGM a Buy

Investment Thesis

The market is obsessing over the short-term Vegas slowdown for MGM Resorts (MGM). Room remodels at the MGM Grand took inventory offline, and Las Vegas tourism softened in 2025. While analysts fixate on next quarter’s Vegas revenue, they’re missing the bigger picture: MGM is building the future of Asian gaming.

Here’s why I’m bullish. MGM is buying back 7-8% of its shares every year, funded by a business trading at a 14.2% owners earnings yield. BetMGM just turned profitable and sent $100M back to the parent company in Q4. MGM is building Japan’s first casino opening in 2030 in Osaka. The catalyst isn’t waiting until 2030 it’s the market waking up over the next year to realize MGM is shrinking the float at a massive discount while multiple growth engines kick in.

Why Buy Now? The Near-Term Catalyst (6-12 Months)

Why buy now if Osaka doesn’t open until 2030? While I believe it’s impossible to predict short term stock price movements here are some catalysts.

BetMGM Cash Distributions

BetMGM sent its first $100M check to MGM in Q4 2025. Management has guided toward $500M in annual EBITDA in the coming years as the digital business scales. MGM has indicated EBITDA is a good approximation for the amount of cash to be sent back to the parent companies. MGM owns 50%, so that would be $250M annually. For 2026, it’s fair to estimate $125-200M coming back to MGM, a dramatic swing from the cash drain of two years ago. This additional cash flow will directly boost Owner Earnings and fuel accelerated buybacks.

MGM Northfield Park Sale Closes (1H 2026)

MGM is selling Northfield Park and pocketing $420M in cash during the first half of 2026. At $34.50 per share, that’s enough to buy back 12M shares, roughly 4.4% of shares outstanding, while also artificially boosting the bottom line.

Las Vegas Strip Stabilization

The Strip bounces back in 2026. Vegas took a hit in 2025 with visitor volume down 2.8% through nine months, MGMS RevPAR down 3-4% in the back half of the year. Part of that was MGM’s own doing. They pulled rooms offline at MGM Grand to renovate them, which temporarily squeezed capacity. The other part was macro softness hitting leisure demand.

But 2026 looks different. The MGM Grand remodel is finished, putting upgraded rooms back in service. Convention bookings are up 8% versus last year, and conventions throw off better margins than walk-in guests. Analysts see sports events driving Vegas tourism up. As renovated inventory comes online and group business accelerates. The Strip isn’t permanently damaged it just had a down year.

Osaka Construction Milestones

Foundation work for Osaka wraps up in 2026, vertical construction starts, and the first tower tops out in 2027. Right now, Osaka is just a concept to most investors. Once there are cranes, steel beams, and actual buildings going up, the market will start assigning value to it. This psychological shift from “risky project” to “tangible asset under construction” could drive a meaningful rerating.

Macau Recovery Continuation

MGM China has started paying dividends again after COVID crushed Macau, sending roughly $200M annually back to the parent. If Chinese tourism keeps recovering through 2026, that number grows past $300M, providing more cash for buybacks.

GAAP Net Income and Owner Earnings: The Accounting Fiction Opportunity

MGM’s reported net loss in the first 9 months of 2025, including $285M loss in Q3 alone, which has scared off investors. This loss is an accounting mirage driven by non-cash items. First, one-time write-offs including a $256M non-cash goodwill impairment at Empire City and $93M in property write-offs. These are paper losses, no cash left the building. Second, the “straight-line” lease penalty. Per the 3Q 10-Q, MGM’s total lease expense includes $430M in non-cash rent annually. GAAP requires MGM to “straight-line” rent over 30 years, artificially inflating today’s expenses.

Let me show you the real economics using Warren Buffett’s Owner Earnings formula: Net Income plus Depreciation and Amortization plus other non-cash charges minus Maintenance Capital Expenditures. For full-year 2024, MGM reported Net Income of $730M. Add back $830M in Depreciation and Amortization, add back $515M in non-cash lease expense, and subtract $600M in maintenance capex. This gives us $1.48B in Owner Earnings for 2024, more than double the reported net income.

For the first 9 months of 2025, MGM reported a Net Loss of $87M, driven by the one-time charges mentioned above. Strip out the accounting noise by adding back $708M in Depreciation and Amortization, $387M in non-cash lease expense, $256M for the goodwill impairment, and $208M for the FX loss. Subtract $450M in maintenance capex. This gives us $1.02B in Owner Earnings through the first 9 months of 2025, annualizing to approximately $1.36B for the full year.

Looking ahead to 2026, the Northfield Park sale will contribute an additional one-time boost to reported GAAP net income. MGM is selling the property for $546M with net proceeds of approximately $420M. The property carries a book value of roughly $294M, meaning the sale will generate a gain on sale of approximately $126M that will flow through to GAAP net income in 2026. Combined with BetMGM’s $125-200M equity income contribution and the elimination of one-time charges, I expect MGM to report GAAP net income of $700M-$1.0B in 2026. This accounting shift from loss to profit will attract momentum investors who screen for profitability, even though the underlying Owner Earnings have been strong all along.

My 12-Month Price Target

MGM is generating approximately $1.36B in full year 2025 Owner Earnings based on the first 9 months. For 2026, I’m projecting Owner Earnings grow to $1.50B. BetMGM adds another $25-100M in cash distributions versus the $100M in 2025, Macau’s continued recovery contributes another $50M as MGM China increases dividends, and Las Vegas Strip stabilization adds $50M as MGM Grand inventory returns and convention bookings strengthen.

Apply a conservative 8x multiple to $1.50B in 2026 Owner Earnings, and that’s a valuation of 12B. Divide by 260M shares outstanding after 2026 buybacks, and I arrive at $46 per share. This represents 34% upside from the current price of $34.50 and doesn’t require Osaka to open. It just requires the market to recognize that MGM is trading at only 7x current Owner Earnings while buying back 7-8% of shares annually and building a monopoly casino in Japan.

MGM’s Business Today: Revenue Distribution and Growth Drivers

Before discussing Osaka, we need to understand the baseline business generating the cash flow funding these buybacks. MGM operates across four primary segments:

Las Vegas Strip (Roughly 45% of Consolidated Revenue)
MGM operates eight properties on the Strip, including Bellagio, Aria, MGM Grand, and Mandalay Bay. In 2024, this segment generated approximately $7.8B in revenue. The core business model is mature: room revenue, food and beverage, entertainment, and gaming. Growth drivers include premium suite conversions, convention business returning to pre-COVID levels, and Formula 1’s annual Las Vegas Grand Prix.

Near-term headwinds include room remodels at MGM Grand temporarily taking inventory offline and broader Strip demand softening in late 2025 due to macroeconomic uncertainty. I view this as noise and not affecting the long term prospects of MGM. The Strip has been declared dead multiple times over 30 years. With the sporting events and conventions in Las Vegas the strip has never been stronger and MGM rules the strip. This segment generates massive, stable cash flow that funds the buyback program.

MGM China and Macau (Roughly 30% of Consolidated Revenue)
MGM operates MGM Macau and MGM Cotai, generating approximately $5.2B in revenue in 2024. After the COVID-era collapse, Macau has been recovering steadily, though not yet fully returned to 2019 levels.

MGM China is now paying dividends again roughly $200M annually to the parent company. As visitation normalizes, this should grow to over $300M, providing additional liquidity for buybacks. The risk is geopolitical: any escalation in U.S.-China tensions could create headwinds.

Regional Properties (Roughly 20% of Consolidated Revenue)
MGM operates regional casinos across the U.S., including properties in Michigan, Mississippi, Maryland, and Massachusetts, generating approximately $3.5B in revenue in 2024. These are mature, cash-generative assets with limited growth potential.

The Northfield Park sale closing in 1H 2026 is part of MGM’s strategy to shed non-core regional assets and redeploy capital into higher-return opportunities.

BetMGM and Digital
BetMGM is MGM’s 50/50 joint venture with Entain operating online sports betting and iGaming. In 2025, BetMGM generated $2.75B in revenue (MGM’s 50% share equals $1.375B). For years, this was a cash furnace burning capital to compete with DraftKings and FanDuel.

That narrative has flipped. In 2025, BetMGM achieved positive EBITDA of approximately $200M and distributed its first cash payment $100M to MGM in Q4 2025. Management has guided to a pathway toward $500M in annual EBITDA, meaning MGM could receive $250M in annual distributions as the business scales.

Total Picture
At the enterprise level, MGM generated approximately $17.2B in revenue in 2024, with Owner Earnings (Operating Cash Flow minus Maintenance Capex) of roughly $1.25B. The business is not growing dramatically, but it is stable and cash-generative. The growth story is about capital allocation through buybacks and the structural addition of Osaka.

Japan: The $9 Billion Growth Engine

In April 2025, MGM officially broke ground on MGM Osaka, a $10B integrated resort set to become Japan’s first legal casino. While competitors are still attempting to gain approvals, MGM has already started construction giving them a massive first-mover advantage in what is widely considered the largest untapped gaming market.

The Osaka Ownership Structure and Cash Flow
MGM Resorts owns 42.5% of the Osaka project through a consortium structure. The remaining ownership is split between Orix Corporation (a Japanese financial conglomerate) and local Osaka business partners. This structure was necessary to gain regulatory approval, as Japan requires significant local ownership.

Industry analysts, including Union Gaming and Bernstein Research, project the resort will generate approximately $2B in annual EBITDA once fully operational. This estimate is based on comparable integrated resorts in Singapore (Marina Bay Sands and Resorts World Sentosa), adjusted for Japan’s regulatory framework and the Osaka metropolitan area’s demographic profile.

MGM’s 42.5% ownership stake means their share of EBITDA will be approximately $850M annually. After subtracting maintenance capex ($150M), interest expense on project debt ($150M), and Japanese corporate taxes (30% effective rate), I estimate MGM’s share of Owner Earnings will be approximately $350-450M annually.

26-33% Increase in Free Cash Flow
In 2025, MGM’s total company-wide Owner Earnings are estimated at approximately $1.35B. Adding Osaka’s projected $350-450M contribution represents a 26-33% structural increase in the company’s distributable cash flow. (Author’s calculation based on stated assumptions and industry analyst projections for Osaka EBITDA)

Investors are buying the current cash stream at a 13% yield while receiving a future 32-40% growth engine for free. The current market cap of $9.4B implies the market is assigning zero value to Osaka’s future cash flows, despite the project being under construction with a clear path to opening.

The Structural Advantages: Tax Rates and Monopoly Positioning
Osaka’s outsized profitability relative to Macau is driven by two factors. First, a lower tax rate. Japan’s gaming tax rate is 30%, which breaks down as 15% national and 15% local, compared to Macau’s 40% effective gaming tax. This 10 percentage point difference flows directly to the bottom line. Second, monopoly market positioning. MGM will be the only legal casino operator in the Osaka metropolitan area, which includes over 19M residents. Unlike Macau where six operators compete, or Las Vegas where dozens compete, Osaka will be a true monopoly for at least the first five years of operation.

The combination of lower taxes and monopoly economics creates a structurally superior asset. This is why analysts believe Osaka will generate margins comparable to Marina Bay Sands in Singapore, which operates under a similar duopoly structure and posts EBITDA margins above 40%.

Timeline and Milestones
The resort is scheduled to open in late 2030. Major construction milestones over the next 24 months include island foundation completion in Q2 2026, vertical construction beginning on the hotel tower in Q4 2026, the first tower topping-out ceremony in Q2 2027, interior build-out and gaming equipment installation through 2028 and 2029, and the grand opening in late 2030. As these milestones are hit, the market will begin assigning real value to the project. Right now, it’s too abstract. Once investors see photos of a physical building rising on the island, the narrative will shift from risky mega-project to near-term cash flow addition.

BetMGM: From Cash Burn to Cash Cow

For years, MGM was burning cash with BetMGM. That narrative is now obsolete, but the market hasn’t fully recognized the shift.

The Profitability Inflection
In late 2025, BetMGM raised its full-year revenue guidance to $2.75B and confirmed positive EBITDA of approximately $200M. This marked the first time the business achieved sustained profitability after years of losses.

BetMGM distributed $200M in cash back to its parent companies in Q4 2025, meaning MGM Resorts received its first check of approximately $100M. Management has reiterated confidence in a pathway to $500M in annual EBITDA in the coming years, which would translate to $250M in annual distributions to MGM based on their 50% ownership.

What Changed?

The shift from growth at all costs to sustainable profitability was driven by three factors. First, technology improvements. BetMGM integrated Angstrom Sports technology, significantly improving their parlay product and boosting hold rates, which represent the percentage of wagers the house keeps. Second, promotional discipline. The irrational promotional spending of 2021-2023 has subsided. The industry has matured, and operators now focus on unit economics rather than raw customer acquisition. Third, market share stabilization. BetMGM has carved out a stable number three position in the U.S. market behind DraftKings and FanDuel. They don’t need to win the market share war, just be profitable where they operate.

Quantifying the Digital Competition Risk
The U.S. online sports betting and iGaming market is dominated by:

· DraftKings: ~30% market share

· FanDuel: ~28% market share

· BetMGM: ~18% market share

· Others (Caesars, Penn, regional operators): ~24% market share

The competitive risk is that the market shifts back toward irrational promotional spending to buy market share. If DraftKings or FanDuel reignite a price war, BetMGM’s margins could compress, delaying expected cash distributions.

However, I view this risk as low for three reasons. First, market maturity. The U.S. market is now live in 38 states, and the growth phase is largely over. Operators are shifting from land-grab mode to profitability mode. Second, the parlay mix shift. The growth of same-game parlays, which have higher hold rates, is structurally improving operator economics. BetMGM’s parlay handle has grown from 25% of total handle in 2023 to over 40% in 2025. Third, iGaming expansion. BetMGM is the Igaming market leader with around 21% market share. Igaming generates significantly higher margins of 25-30% compared to 5-8% for sports betting. As more states legalize iGaming, this higher-margin revenue stream will grow.

How BetMGM Mitigates Risk
The bull case doesn’t require BetMGM to win the market just remain profitable and distribute cash. Even if BetMGM’s EBITDA stays flat at $200M rather than growing to $500M, that’s still $100M in annual distributions to MGM, directly funding buybacks.

Furthermore, if the business scales to $500M in EBITDA as management projects, MGM’s distributions could approach $250M annually a meaningful swing from the $100-150M in annual losses MGM was absorbing in 2022-2023. With Igaming legal in only 6 states I expect growth to continue from BetMGM>

The Cannibal of the Strip: Capital Allocation

While we wait for the Japan thesis to play out, management provides a powerful safety net by relentlessly cannibalizing its own share count. Since 2017, MGM has reduced its share count from approximately 580M to roughly 273M as of late 2025 a reduction of over 50%, unrivaled in the gaming sector.

Management has the liquidity to maintain this aggressive pace. As of Q3 2025, MGM held approximately $2.1B in cash and cash equivalents. In addition to existing cash, the Northfield Park sale will bring in $420M in net proceeds in the first half of 2026, MGM China dividends will contribute approximately $200M annually and are growing toward $300M or more, and BetMGM distributions will add $100M or more annually with the potential to scale to $250M.

With fresh capital coming from these sources, the buyback machine is fully funded. Management is effectively privatizing the company in slow motion at a discount, a strategy validated by major shareholder IAC Inc., which purchased an additional $40M worth of stock in December 2025.

Risks

While the upside potential is significant, MGM operates in a cyclical, highly regulated industry prone to volatility. Investors must weigh the following risks:

Macroeconomic Sensitivity
As a consumer discretionary business, MGM is extremely sensitive to consumer behavior. A recession or significant pullback in consumer spending would disproportionately hurt the Las Vegas Strip and Regional operations. While the luxury segment has historically been resilient, a prolonged downturn would compress margins and slow the buyback machine.

Geopolitical Fragility (China and Japan)
The company’s fortunes are increasingly tied to Asia. In Macau, MGM China operates under a concession system subject to Beijing’s regulatory and political whims. Any escalation in U.S.-China tensions could jeopardize their license or restrict travel. Similarly, the Osaka project operates in a complex bureaucratic environment. While approved, any shifts in Japan’s political landscape or public sentiment toward gambling could create headwinds.

Digital Competition
If the online gaming market shifts back toward irrational promotional spending, BetMGM’s margins could compress, delaying expected cash distributions.

Execution Risk in Osaka
Building a $10B island resort is an engineering and logistical tightrope. Mega-projects of this scale are notorious for cost overruns and timeline delays. If the Osaka opening pushes beyond 2030 or costs balloon significantly, the thesis weakens and the ROI diminishes.

Valuation

To properly value MGM Resorts, we must look past standard GAAP earnings and focus on Owner Earnings.

At the current price of $34.50, MGM has a market capitalization of approximately $9.4B. Based on 2025 estimates, the company is generating roughly $1.3B in Owner Earnings. This implies the stock is trading at just 7.2x Owner Earnings, offering a massive 13.8% shareholder yield. This double-digit yield provides the fuel for management’s aggressive capital return program. Over the last eight years, MGM has retired approximately 300M shares and over 20M in 2025 alone.

The 7-Year Return Table
To illustrate the asymmetry of this trade, I have modeled potential returns over a seven-year holding period with an exit in 2033. Future buybacks are dynamic: if the stock price remains low, the buyback machine becomes more potent; if the price appreciates rapidly, share retirement will naturally slow.

The Inputs:

In the Bear Case scenario, I assume minimal buybacks of 10M shares per year and stagnating Owner Earnings at $1.3B. This assumes Osaka faces significant delays or underperforms, BetMGM returns to losses and becomes a cash drain again, and Macau stagnates with no recovery in Chinese tourism. Under these assumptions, the share count would decline from 273M today to approximately 203M by 2033, resulting in Owner Earnings per share of $6.40.

In the Base Case scenario, I assume moderate buybacks of 15M shares per year and Owner Earnings growth to $1.7B. This assumes Osaka opens on time in late 2030 and contributes approximately $400M in Owner Earnings to MGM, BetMGM remains profitable and distributes $100-125M annually in cash, and the core business of Vegas, Macau, and Regional properties remains stable. Under these assumptions, the share count would decline to approximately 168M by 2033, resulting in Owner Earnings per share of $10.12.

In the Bull Case scenario, I assume aggressive buybacks of 20M shares per year enabled by strong cash generation and full Osaka execution, with Owner Earnings reaching $2.0B. This assumes Osaka exceeds projections and contributes approximately $500M in Owner Earnings, BetMGM scales to $500M in EBITDA with $150M in annual distributions to MGM, and Macau fully recovers to pre-COVID levels with MGM China distributing $300M or more annually. Under these assumptions, the share count would decline to approximately 133M by 2033, resulting in Owner Earnings per share of $15.04.

7-Year Return Table (Assumes $34.50 Starting Price)

The table shows the profound margin of safety built into the current price. Even in a disaster scenario where Owner Earnings stagnate at the Bear Case level of $1.3B and the market assigns a distressed 8x multiple, the stock still protects your principal at $51.20 per share. Conversely, if the company merely executes on its Base Case and trades at a modest 12x multiple on $1.7B in Owner Earnings, investors achieve a 19.5% CAGR, more than tripling their money. In the bull case where the Osaka thesis is fully realized, Owner Earnings reach $2.0B, and the market values this monopoly asset at a 20x multiple, the stock becomes an 8.7x bagger at $300.80 per share.

Supporting the $301 Bull Case Valuation
I acknowledge this is well above MGM’s all-time high of roughly $94, which was briefly reached in 2007. However, the $301 valuation in the Bull Case assumes three things.

First, Owner Earnings per share of $15.04. This requires $2.0B in Owner Earnings spread across approximately 133M shares after aggressive buybacks. For context, MGM generated approximately $1.48B in Owner Earnings in 2024 with 273M shares outstanding. That translated to roughly $5.42 per share in Owner Earnings. The combination of Osaka adding $500M in Owner Earnings and the share count shrinking by 51% from current levels makes $15.04 in Owner Earnings per share mathematically achievable. In fact, it represents only a 2.8x increase in per-share Owner Earnings from 2024 levels, which is reasonable given the structural addition of a monopoly casino in Japan.

Second, a 20x multiple on Owner Earnings. A 20x multiple is not unreasonable for a company with a monopoly asset in Japan generating 40% EBITDA margins and a proven track record of shareholder returns through buybacks. For comparison, Las Vegas Sands, which operates Marina Bay Sands in Singapore, has historically traded at 18-22x earnings when Singapore cash flows were at peak. MGM with Osaka fully operational would possess a similar monopoly dynamic in a wealthy, underserved gaming market.

Third, full Osaka execution. This scenario assumes Osaka opens on time, performs at or above projections, and is valued by the market as a premium asset rather than discounted for execution risk. It also assumes management continues to aggressively buy back stock at attractive prices throughout the 2026-2030 period while Osaka is under construction.

Is this likely? No. Is it possible? Yes. The point of scenario analysis is not to predict the future, it’s to understand the range of outcomes and the asymmetry of risk and reward.

Conclusion

The math is compelling. At $34.50 per share, the downside is protected by massive buybacks funded by a 14.2% owners earnings yield, while the upside offers potential annual returns exceeding 20-30%. Investors are effectively being paid to wait while holding a free ticket to the biggest casino opening of the next decade.

The near-term catalyst is not Osaka’s 2030 opening it’s the market’s recognition over the next 6-12 months that MGM is aggressively shrinking its share count while multiple growth engines simultaneously kick in. BetMGM is shifting from capital drain to capital source, with $125-200M in cash distributions expected in 2026 versus the losses of prior years. The Northfield Park sale closes in the first half of 2026, injecting $420M in proceeds that will fund accelerated buybacks and debt reduction. Las Vegas Strip operations should stabilize and reaccelerate as MGM Grand room renovations complete and record convention bookings for 2026 convert to revenue. Macau recovery continues with MGM China dividends growing toward $300M annually. Osaka construction milestones will become visible throughout 2026 and 2027, shifting the narrative from abstract concept to tangible asset. And perhaps most importantly, GAAP net income will swing from loss to profit in 2026 as one-time charges vanish and the Northfield sale contributes a $126M gain, attracting momentum investors who screen for profitability.

For these reasons, I rate MGM Resorts a Buy up to $46 per share.