Gaming stocks gaining back some ground

David Strow

Friday, Oct. 12, 2001 | 10:07 a.m.

Las Vegas' four major casino operators enjoyed a big day Thursday on Wall Street, with one-day gains of 7 percent to 16 percent in their stock prices.

But analysts warned the gains were likely a short-term move and that fundamentals for the companies remain challenging. That already appeared to be the case this morning, as the companies began giving back some of Thursday's gains.

Thursday's star was MGM MIRAGE, which closed at $25.60. That marked a one-day gain of $3.56, or 16 percent.

Harrah's Entertainment Inc. rose $2.34, or 9 percent, to $28.21, almost returning to its pre-Sept. 11 level of $28.71. Mandalay Resort Group gained $1.47, or 8 percent, to close at $19.44; Park Place Entertainment Inc. increased 56 cents, or 7 percent, to $8.35.

"Consumer cyclicals in general experienced a significant rally (Thursday) ... lodging and retailers moved up quite dramatically," said David Anders, gaming analyst with Merrill Lynch. "It was more of a consumer cyclical move rather than simply a gaming move ... there really wasn't a gaming-specific item I can attribute it to."

Consumer cyclicals were pushed up by Thursday's report that initial jobless claims showed the biggest decline in nine years, raising hopes of economic recovery, Anders said.

Brian Egger, gaming analyst with CS First Boston, believes the move may have been a "sign of relief occupancy numbers are getting incrementally better." Investors buying the stocks to cover their short positions may have also played a role, he said.

"There's so much volatility in the day-to-day news flow that I'd characterize it as a tentative and short-term move," Egger said. "Things are getting sequentially better, but it's too early to say things are permanently better."

Anders agreed that fundamentals for the group remain weak, but said improvement in occupancy was encouraging. Still, he said, at some point investors will once again begin worrying about the slowdown that had been impacting the gaming industry even before Sept. 11.

"At some point, you will have investors talking about that again, but right now investors are just relieved business is coming back," Anders said.

Since the market bottomed Sept. 21, all four companies have enjoyed strong rallies -- though MGM MIRAGE, Park Place and Mandalay remain well below their pre-Sept. 11 levels. Since Sept. 21, MGM MIRAGE is up 35 percent, Mandalay has risen 31 percent, Park Place is up 27 percent, and Harrah's has risen 19 percent.

Gaming stocks began giving up some of their Thursday gains this morning.

MGM MIRAGE, Thursday's biggest gainer, was also the biggest loser this morning, falling more than 5 percent to $24.29. Park Place traded down more than 4 percent to $8, Harrah's fell nearly 3 percent to $27.39, and Mandalay Resort Group retreated 2 percent to $19.05.