Morgan Stanley cut its rating on MGM Resorts from Equal-weight to Underweight, citing a weaker core Las Vegas business and deteriorating conditions in Macau. The bank also lowered its view on Marriott Vacations Worldwide, arguing its turnaround is taking longer than expected amid higher costs. Both moves reflect a cautious stance on the broader leisure sector.

The downgrade underscores persistent headwinds for casino operators heavily exposed to the Asian gambling hub. While MGM's Las Vegas operations remain a key revenue driver, the combined pressures from Macau's slower recovery and a less compelling free cash flow yield compared to peers have dimmed its near-term investment appeal for the analyst.

Morgan Stanley’s broader 2026 outlook suggests muted fundamentals for the entertainment sector, with strength concentrated in companies serving older, higher-income consumers. The bank favors names like DraftKings and Hyatt for clearer growth paths, while advising caution toward stocks with weaker cash flow profiles or slowing fundamentals.