Casino, Vegas stocks generally decline with market

David Strow

Thursday, March 15, 2001 | 11:08 a.m.

Wrong tables published

An error of some kind led to publication of the Feb. 15 stock tables in today's Las Vegas Review-Journal.

Sherman Frederick, publisher of the R-J, believed all papers circulated today contained the dated tables, but said he did not yet know what caused the mix-up.

"Interestingly, we're not getting many calls on it," Frederick said.

This week, it seems virtually every public company in the United States is watching its stock get hammered.

The gaming industry is certainly no exception, with major industry stocks trading down 2 to 3 percent Wednesday and 5 to 9 percent so far this week.

Through Wednesday's close, Harrah's Entertainment Inc. was hardest hit, trading down 9.3 percent on the week. Park Place Entertainment Corp. was off 8.2 percent in the last three trading days, while MGM MIRAGE was down 4.7 percent and Mandalay Resort Group was off 4.6 percent. Station Casinos Inc. was off just 2 percent.

Park Place fell 36 cents to $9.68 Wednesday, and its 3.6 percent decline was the worst for the day among major gaming operators. It traded as low as $9.40 during the day, a 52-week low.

By comparison, the Dow Jones Industrial Average was off 6.3 percent over the past three trading days, while the tech-rich Nasdaq was down 20 percent.

Markets stabilized this morning, with the Dow up 12.45 to 9,985.91.

Like the major stock indexes, Las Vegas gaming companies were starting to rise modestly this morning. MGM MIRAGE traded up 22 cents to $26.23; Mandalay gained 23 cents to $20.29; Park Place traded at $9.83, up 15 cents; and Harrah's rose 50 cents to $29.37. Station, however, fell 2 cents to $13.98.

"These declines are pretty much in line with the market," said Brian Egger, gaming analyst with CS First Boston. "The economy is a valid concern for gaming companies, but we're sticking with our thesis ... that the demand environment (for gaming companies) is looking relatively healthy later this year. From an investment perspective, their valuations are still pretty low."

The impact from a potential recession, high energy prices and California Indian gaming should be at least partially offset by a slowing of new supply in the Strip market this year and "reasonably solid first quarter trends," Egger said.

"These have been perceived as being consumer cyclicals, but historically, (the connection to the broader economy) has been pretty muted," Egger said. "These stocks will trade in tandem with the market."

Others, however, are concerned that Las Vegas and the gaming industry could be hit hard by a recession. Robin Farley, gaming analyst with UBS Warburg, points out that there are two big unknowns -- one, how new gaming markets will hold up in a recession; and two, how non-gaming revenues, which make up half of the Strip's total revenues, will fare in a downturn.

"The market won't wait for the verdict to come in," Farley said.

Gaming stocks have generally been falling all year; MGM MIRAGE is off 7.7 percent for the year, Mandalay is down 8.5 percent, Station has declined 6.3 percent and Park Place is off 19.3 percent.

Park Place stock began falling hard after the company reported disappointing earnings for the quarter ending Dec. 31. On Monday, Farley cut her earnings estimates for the first quarter from 14 cents to 12 cents per share, citing "lower-than-expected gaming revenues at Park Place's Atlantic City properties ... through February."

Harrah's has been a different story, trading well above the rest of the gaming sector this year. Even considering this week's declines, Harrah's is still up 9.4 percent on the year, while the Dow is off 7.6 percent. The rise is credited to investor expectations that losses from its casino in New Orleans will be stemmed, as the Louisiana Legislature is considering a proposal to dramatically reduce its taxes.

Matching Harrah's relatively strong performance this year is International Game Technology of Reno. Though IGT was down 6.6 percent in the last three days, the stock is still up 8.3 percent on the year, primarily because of heavy demand from California and IGT's successful bid to regain market share with new product lines.

Other Las Vegas companies certainly haven't been immune to the stock market woes of the week.

The city's most volatile stock, PurchasePro.com, traded down 6.4 percent to $10.06 on Wednesday alone, making it the worst hit among major local companies in the day's sell-off. The bears of 2001 haven't been kind to dot-coms, and the Las Vegas e-commerce company is no exception; PurchasePro was down 7.5 percent this week through Wednesday, and off a whopping 42 percent from its Dec. 29 close of $17.50.

Healthcare concern Sierra Health Services was down 6.4 percent on the week, while Southwest Gas Corp. was trading down 6.6 percent from its Friday close. Sierra Pacific Resources, parent company of Nevada Power Co., was holding up better in the sell-off, trading down 2.5 percent on the week.