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Jeffries upgrades stock to ‘buy’

Wednesday, Feb. 6, 2002 | 9:21 a.m.

MGM MIRAGE was upgraded from "accumulate" to "buy" by Jeffries & Co. Monday, following a stronger-than-expected fourth quarter by the Las Vegas Strip casino giant.

Jeffries gaming analyst Larry Klatzkin raised his price target from $30 to $43, his 2002 earnings estimate from $1.31 to $1.36 per share, and his 2003 estimate from $2.03 to $2.10 per share. Klatzkin forecast that MGM MIRAGE's cash flow in 2002 will dip 1 percent to $1.13 billion, followed by more than 10 percent growth to $1.3 billion in 2003.

The increased estimates "reflect the recovery in Las Vegas (particularly the high-roller segment), improving margins throughout MGM's properties, and lower interest from paying down debt," Klatzkin wrote.

"We believe MGM will be the major beneficiary of the faster-than-expected recovery in Las Vegas," Klatzkin wrote.

Klatzkin said earnings should also be boosted by the opening of the Borgata in Atlantic City in 2003; the introduction of a multiproperty players' card by MGM MIRAGE in April; and remodeled rooms at the New York-New York, Golden Nugget Las Vegas, Beau Rivage in Biloxi, Miss., and three Primm properties. Should MGM MIRAGE be successful in winning one of three gaming licenses soon to be awarded in Macau, "it would be a major positive," Klatzkin wrote.

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