Large-cap gaming companies were strongly impacted by the events of the Sept. 11 attacks on New York and Washington, D.C., but they were trading sideways, anyway, says Robin Farley, the often-quoted chief gaming analyst for UBS Warburg.
In a recent research note, Farley said that even without 9/11, these companies, such as MGM MIRAGE Inc. (MGG), Mandalay Resort Group (MBG), and Park Place Entertainment Corp. (PPE) had trended sideways or even downward in the previous 12 months and they likely would have continued in that pattern.
Because of the sudden drop after the catastrophe, she said, it “will set up the stocks to have positive comparisons 12 months from now, when they otherwise may have continued their sideways movement.” This will be a question of recovery and not of real growth, she says.
“Not a single Las Vegas Strip or Atlantic City property has been able to grow cash flow consistently over the past five years, even in good years for the economy. If/when Las Vegas gets back to its pre-9/11 trends, those trends were already slowing or declining, in many cases. And, looking back to 1991, it took more than two years for Las Vegas to get back to a consistent growth pattern,” she wrote.
She has only two major gaming companies on her list of “buy” ratings. They are Argosy Gaming (AGY) and International Game Technology (IGT). Among her “hold: ratings, are MGG, MBG, PPE, Harrah’s Entertainment Inc. (HET), and Station Casinos Inc. (STN).