Merrill Lynch downgrades gaming stocks
Thursday, Dec. 21, 2000 | 11:08 a.m.
Merrill Lynch today downgraded five gaming stocks, as concerns of a gaming industry slowdown continued to build on Wall Street.
In a report issued today, Merrill Lynch gaming analyst David Anders downgraded MGM MIRAGE, Mandalay Resort Group, Park Place Entertainment Corp., Aztar Corp. and Station Casinos Inc.
Anders said his decision to downgrade the sector was primarily based on reports of a slowdown of the U.S. economy.
"At some point, that has to filter into gaming," Anders said. "I thought a more conservative stance was warranted. We're not seeing (an impact on gaming) yet, but my suspicion is that large leisure purchases tend to lag the economy on the way down and on the way up."
Anders downgraded MGM MIRAGE and Park Place from "buy" to "accumulate"; Mandalay from "long-term buy" to "long-term accumulate"; and Station and Aztar from "accumulate" to "neutral." Anders maintained long-term buy ratings on MGM MIRAGE, Park Place and Station.
A growing number of gaming analysts are growing bearish on the prospects of the gaming industry -- and of Las Vegas in particular -- in 2001. Reports urging gaming investors to be cautious have recently been issued by UBS Warburg, Bear Stearns and Lehman Bros.
While noting that fourth quarter gaming figures appear solid, Anders noted "there is overwhelming evidence that the economy and the consumer are slowing. Therefore, we believe it may be only a matter of time before this begins to show up in Las Vegas." Anders added that the "new" Las Vegas model, based much more heavily on non-gaming revenues than in the past, would feel more of an impact from an economic slowdown.
Anders also expressed concern that weakening Asian markets could impact the Strip's high-roller business, as 85 percent of high-end gamblers come from that market. He also noted that the potential closure of National Airlines and the growth of Indian gaming in California in 2001 could cause difficulties for the Strip in the coming year.
National has filed for bankruptcy, but says it will continue to operate all its flights.
Anders maintained some accumulate ratings because of historically low valuations in gaming stocks, the amount of free cash flow being produced by gaming companies, and limited new supply in Las Vegas until at least 2004.
The sole major gaming stock to avoid a downgrade was Harrah's Entertainment Inc., which Anders kept at buy.
"I still like the Harrah's geographic diversification and their operating strategy, which is continuing to yield results," Anders said.
Park Place was the hardest hit on Wall Street, trading at midday at $11.25, off 88 cents. MGM MIRAGE was off 6 cents to $25.19.
But little effect was seen on the stock prices of other gaming operators: Mandalay traded at $19.88, up 19 cents; Station traded at $14.88, up 13 cents; and Aztar was at $11.81, up 19 cents.
archive
- Most Read
- Discussed
- Most E-mailed
- Sarah Palin wasn’t a disaster, but Obama is
- CityCenter’s Mandarin Oriental makes Vegas debut
- Kimbo Slice not enjoying cutting weight for first time
- As national jobless rate improves, LV sees signs of trouble
- AG says any Station Casinos trustee must be licensed by regulators
- Pacquiao-Mayweather fight on, March date likely
- Kruger may soon seek more disciplined shot selection
- Del Sol seeks upset against powerhouse Bishop Gorman
- Sub-freezing temperatures hit Las Vegas
- Jim Gibbons vs. Harry Reid: Health care plan ignites dispute
Blogs
Robin Leach's Las Vegas Celebrity Watch
Great Santa Run: Unofficial 14,595 runners would be a new record
Elsewhere
Rampage Jackson to return to UFC (3 Comments)
Politics: Ralston's Flash
Superintendents want state to immediately seek Race to Top funds
Top Chef: Las Vegas
The Jet Stream: The great Jennifer debate (2 Comments)
The Kats Report
From Eva Longoria Parker to a cluster of execs, crowd takes a shine to Crystals (3 Comments)
Elsewhere
Harry Reid's recipe for getting health-care deal done (10 Comments)
UNLV in at No. 11 in SI's college hoops power rankings (3 Comments)
Calendar »
- 5 Sat
- 6 Sun
- 7 Mon
- 8 Tue
- 9 Wed
-
Chickenfoot at The Joint
The Joint | 8 p.m. to 11:59 p.m.
-
The Ultimate Fighter 10 Finale at the Pearl
The Pearl at the Palms | 4 p.m. to 10 p.m.
-
Great Santa Run at Town Square
Town Square | 8 a.m. to 10 a.m.
-
Willie Nelson at Planet Hollywood Theatre for the Performing Arts
Planet Hollywood Resort and Casino | 9 p.m. to 11:59 p.m.
-
Cash'd Out at Aliante Station
Aliante Station Casino and Hotel | 9 p.m. to 11:59 p.m.
-
Brooks & Dunn at the Hilton
Las Vegas Hilton
-
Ron White performs at the Mirage
Terry Fator Theatre
The Sun
Locally owned and independent for more than 50 years.
Technorati












