Analyst downgrades stock

Wednesday, Aug. 27, 2003 | 11:08 a.m.

Merrill Lynch casino analyst David Anders has lowered his rating on Harrah's Entertainment Inc. to "neutral" from "buy" based on competitive concerns in certain areas nationwide.

Competitor Ameristar Casinos Inc. is "using capital as a weapon to maximize revenue market share" in St. Louis, Kansas City and Council Bluffs, Iowa, which "could likely lead to declining returns for all market participants," Anders wrote in a research note to investors today.

Also, the Borgata luxury resort in Atlantic City -- a joint venture of Boyd Gaming Corp. and MGM MIRAGE that opened in July -- "may not be growing the market as anticipated," he said.

Over the next six months, rhetoric surrounding the legalization of new gaming jurisdictions and their potential threat to Harrah's properties will likely increase, he added.

"Although we do have some concerns about the near term, we would highlight Harrah's strong brand, balance sheet and focused management team as key drivers for our neutral rating," he said. Over the last three years, the company's stock has appreciated at an annual compound rate of about 16 percent, compared to 10 percent and 2 percent increases, respectively, for Mandalay Resort Group and MGM MIRAGE, he said.

Harrah's stock fell more than 2 percent in early trading today, to $41.40.