Gaming coverage initiated with three strong buys

Wednesday, June 28, 2000 | 10:59 a.m.

Financial firm WR Hambrecht + Co today initiated coverage of the gaming industry, issuing "strong buy" ratings on MGM MIRAGE, Harrah's Entertainment Inc. and Station Casinos Inc.

Hambrecht analyst Jeffrey Logsdon set a $45 price target for MGM MIRAGE, a 38 percent premium over its current price, saying "the consistent outperformance in quarterly results is attracting a significant level of momentum investors."

Logsdon also set a strong buy on Harrah's with a price target of $34, 57 percent above its current levels.

"This company represents quality growth at a significant discount," Logsdon said. He noted that resolution of difficulties at the Rio and in New Orleans could help boost earnings in the near-term.

Logsdon issued a third strong buy rating on Station, citing the company's leading position in the Las Vegas locals market and its five-year expansion plan. His $36 price target is 33 percent above current trading levels.

"This market is the third-largest segment of the gaming market, and we estimate that, in terms of revenue, Station captures a 42 percent share, which could grow to close to 65 percent in the next five years," Logsdon said.

Logsdon also issued buy ratings on Park Place Entertainment Corp. and Mandalay Resort Group.

Park Place, he said, now possesses a stable of strong brand names, "and we believe the company's ability to differentiate between its brand names is important going forward in order to maximize the potential leverage from the brands." His $16 price target is 29 percent above Park Place's current levels.

Mandalay, Logsdon wrote, "has been weighed down by almost two years of erratic earnings performance and substantially reduced returns on invested capital."

"We believe that the company has finally turned the fundamental corner and expectations should turn more positive," Logsdon said. He set a price target of $26, a 20 percent premium.