Prudential Equity Group has once again decided to cover the gaming industry and issued a client’s note, prepared by analyst Joel Simkins, explaining that he had positive views about the industry as a whole.
Of the major companies, Simkins gave MGM MIRAGE Inc. (MGM) a "neutral" rating not because of concerns relative to that company’s future but primarily because of the recent increase in the company’s share value.
"While MGM MIRAGE has an impressive pipeline of domestic and international growth opportunities, we think the shares are due for a breather given a roughly 100 percent move in the stock since September, 2006.
Also given a "neutral" rating was Trump Entertainment Resorts Inc. Simkins said he was cautious on Trump due to its competition from Atlantic City megaresorts being developed and newer slot facilities in Pennsylvania. He said he had confidence in the company’s management team.
Leading the group listed as "underweight" was Isle of Capri Casinos Inc., primarily because of a slowdown being experienced in Biloxi, Miss.
"After the company came up empty in Pennsylvania and Singapore, we think its growth pipeline is average at best, and we see increasing competitive challenges across the portfolio," Simkins wrote about Isle of Capri.
Another "underweight" rating was attached to Pinnacle Entertainment Inc. (PNK). Simkins felt the company may face some risks to its growth plan that is expected to cost between $3.4 billion to $3.6 billion on new projects.
"That amount," he said, "is significant considering the company had total assets of $1.5 billion in the third quarter of 2006."
Among other companies, Simkins gave "overweight" ratings to Penn National Gaming Inc. (PENN), Boyd Gaming Corp. (BYD) and Shuffle Master Ins. (SHFL); a "neutral" rating on Ameristar Casinos Inc. (ASCA), and an "underweight" rating on International Game Technology (IGT).
On Monday, Joe Greff of Bear Stearns initiated coverage of Las Vegas Sands Corp. (LVS) with a "peer perform" rating. He also reduced his rating on MGM MIRAGE to "peer perform" from "outperform."
However, he boosted his price target on Wynn Resorts Ltd. to $124 from $108 with the explanation that by applying the same Las Vegas Strip and Macau variables to Wynn that he applied to Las Vegas Sands and MGM MIRAGE the result was for a "much higher share price."