Analyst picks Harrah’s, Alliance

Friday, Jan. 4, 2002 | 9:56 a.m.

CIBC World Markets gaming analyst William Schmitt, designated the top analyst covering the gaming industry by Zacks Investment Service, picked Harrah's Entertainment Inc. and Alliance Gaming Corp. as two of his four top choices in the gaming sector in a Zacks e-mail newsletter issued today.

Schmitt selected Harrah's as his only large-cap pick because of its diverse portfolio of properties, the strong performance of its Las Vegas properties in a weakening Las Vegas market and its strong customer systems and databases. Schmitt set a price target of the "low-$40s."

In picking Alliance, Schmitt noted a "strong, robust (gaming) systems business" was helping the company step up an acquisition strategy. He also noted Alliance's slot route business, which generates "significant cash flow," and Alliance's new "EVO" slot machine platform, which he felt could be a driver of future growth for the company. Schmitt has a $30 price target on the stock, but said this target could be conservative if investors are willing to give Alliance a higher multiple of stock price to earnings.

Isle of Capri Casinos of Biloxi, Miss., is the gaming sectors "least extensive valuation of the group, (presenting) a compelling investment at (current) prices," Schmitt said. Schmitt has a price target of $16 for Isle of Capri, which he feels is"conservative."

The fourth selection by Schmitt was Hollywood Casino Corp. of Dallas, a "surprisingly tough performer in an incredibly tough market (Mississippi)." Schmitt noted that comparisons to last year's earnings should be "impressive" after expansion of its casino in Aurora, Ill., is complete in June.

Schmitt's selections for 2001 resulted in a 67 percent return through November 2001, the highest return of any gaming analyst tracked by Zacks.