While Las Vegas-based casino operators are making every effort to ward off potential bankruptcies, a Goldman Sachs analyst said Friday that he still does not see much upside to the stocks.
Las Vegas-based companies such as MGM MIRAGE, Wynn Resorts Ltd. and Las Vegas Sands Corp. have struggled during the recession as gamblers have opted to spend less on gaming, entertainment, dining and hotels. Some gamblers have even decided to stay closer to home, benefiting regional casino operators.
While the Las Vegas trio have moved to improve their financials -- MGM and Las Vegas Sands through capital infusions and credit agreement convenant restructurings, Wynn by lowering balance sheet concerns - analyst Steve Kent still sees risks.
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"All three companies will conserve cash and growth and face weak demand and overbuilding in Vegas," he wrote in a client note.
Kent named Wynn Resorts his favorite Las Vegas casino operator, citing its lower credit risk and Macau exposure.
Wynn's stock gained 24 cents to $39.68 in midday trading.
MGM is Kent's least favorite, partly due to the company's high debt level. MGM, majority owned by billionaire Kirk Kerkorian, plans to raise $2.5 billion in capital to help it pay down some of its $14 billion debt and improve its balance sheet.
Shares of MGM MIRAGE climbed 39 cents, or 5 percent, to $8.15. The stock has traded in a 52-week range of $1.81 to $53.67.
Another Las Vegas casino operator, Las Vegas Sands Corp., added 30 cents, or 3.2 percent, to $9.73 as media reports surfaced Friday that it is planning an initial public offering of its Macau assets. Las Vegas Sands declined to comment on the reports.
Kent boosted the price targets of all three companies. He raised Wynn's to $39 from $26 and lifted MGM's to $8.25 from $4.50. Kent increased the Sheldon Adelson-led Las Vegas Sands' price target to $6.50 from $1.
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