Casino chain MGM Resorts (NYSE:MGM) is feeling the pinch from the recent cyberattack on its IT operations. In a regulatory filing yesterday, MGM disclosed that it would take a $100 million hit to its earnings in the third quarter owing to the attack. Notably, the casino operator refused to pay ransom to the hackers to recover the stolen data or stop the hackers from intruding further into the system.
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In regard to the ransomware attack at MGM’s Las Vegas Strip resorts in September, the company put its IT systems on hold, shut down its slot machines, and interrupted online hotel reservations. The resort staff was compelled to resort to traditional pen-and-paper methods for taking bookings for a couple of days. The company stated that all operations have returned to their regular state.
Details Regarding the Cyber Hack’s Effect
Unfortunately for MGM, the hackers were successful at stealing customers’ data from the resort’s database before March 2019. These included customer names, phone numbers, addresses, dates of birth, and driver’s license numbers. Also, in some cases, the customer’s social security numbers and passport numbers were stolen. MGM Resorts CEO Bill Hornbuckle apologized to the customers for the lost data and said that the resort would get in touch with those affected by the attack.
Remarkably, the resort’s occupancy levels dropped to 88% in September compared to 93% a year earlier due to the temporary stoppage of bookings and the usage of manual operations. In the meantime, October’s occupancy rate is expected to be 93%, and bookings could return to normal levels in November, MGM added.
The attack is expected to impact MGM’s adjusted property earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR) for U.S. properties by roughly $100 million. Meanwhile, expenses related to the remedial actions taken to stop the attack, including legal fees and technology consulting, were less than $10 million. The resort operator noted that it has adequate cybersecurity insurance to cover the damages and that the amounts would not have any significant impact on its performance for the full year.
Another casino giant, Caesars Entertainment (NASDAQ:CZR), was faced with a similar cyberattack following MGM. However, Caesars was quick to pay a ransom of approximately $30 million to the hackers and save any potential damage to its operations. Similarly, cleaning agent producer, Clorox (NYSE:CLX) was hit with a cyberattack in August that has impacted its financial performance to a great extent.
Is MGM a Buy, Sell, or Hold?
Of the eight Top Analysts who recently rated MGM stock, seven have given it a Buy against one Hold rating. Top Wall Street analysts are those awarded higher stars by the TipRanks Star Ranking System. This is based on an analyst’s success rate, average return per rating, and statistical significance (number of ratings).
Based on these analysts’ views, MGM commands a Strong Buy consensus rating on TipRanks. The average MGM Resorts price target of $60.56 implies a humongous 74.1% upside potential from current levels. Year-to-date, MGM stock is up 4.5%.
