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The Newsroom - 2002 |
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Gaming stocks end week up
Expert: Industry in defining period
October 26, 2002 - Gaming stocks as a group, trending closely with the overall
market, started the week like a lion, but finished like a mouse.
After teasing skittish investors, gaming stocks posted a 2 percent gain at
week's end. The market overall was up 1 percent for the week.
"This is a defining period for the gaming industry," said Goldman Sachs' Steve
Kent.
"There is a debate in investors' minds whether growth (in the gaming industry)
will be sustained by casinos other than just from cost-cutting," he said. "You
need to see an acceleration in revenues which would send stocks forward or a
deceleration which will pull them down."
Gaming stocks will continue to trend with the market, he said, until momentum in
the industry is confirmed.
"Gaming stocks have been under some selling pressure over the past few weeks,"
said Merrill Lynch analyst David Anders. However, "this week, we saw them
rebounding nicely off their lows."
The Applied Analysis Gaming Index, a monthly weighted average of gaming stocks
developed by a Las Vegas-based financial consulting firm to track eight industry
stocks, increased from 217.03 to 223.94, an increase of 2 percent for the week
ending Friday.
Performance of the gaming index was consistent with the overall market, said
Brian Gordon, a principal in Applied Analysis. "There were no real surprises in
third-quarter earnings announcements, so results already had been discounted."
"We also saw the debut of Wynn (Resort)'s stock after a massive drop from the
expected opening (from $21 to $23 a share to $13 a share). We were interested in
seeing whether there was a massive spike, but it didn't happen. The
institutional investors knew what to expect."
Continued weakness in the travel business, evident from a spate of earnings
reports, tossed cold water over the hospitality and lodging industry in general
at the beginning of the week, but financial analysts for the gaming industry
said casinos again will prove their resilience despite overall market
conditions.
UBS Warburg on Monday set the tone for the week by cutting stock price targets
for nine of the 10 hospitality firms it follows.
The Wall Street firm forecast average room revenues would fall 2 percent in 2003
while management expenses will rise as companies continue cutting travel budgets
to lower their own expenses in the sluggish economy.
Despite starting the 2002 fourth quarter with a squeal, Wall Street analysts
this week predicted a roaring fourth quarter for gaming stocks.
Argosy Gaming Co. Ameristar Casinos Inc. and Park Place Entertainment Corp. fell
short of preliminary Wall Street forecasts in the third quarter, but each also
claimed unique problems, such as construction at Park Place's Caesars Palace
which drove off customers.
Analysts see them as improving their performance in the fourth quarter of 2002
and in 2003.
Harrah's Entertainment Inc. is expected to see at least a small upside because
of performance in Atlantic City and Las Vegas and MGM Mirage is expected to show
continued strength in Las Vegas where it has managed room rates well, analysts
agreed. |
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