Gambling-related stocks down 2.9 percent in June - Breaking News

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Jun. 30, 2009
Copyright © Las Vegas Review-Journal

Gambling-related stocks down 2.9 percent in June

By BENJAMIN SPILLMAN
LAS VEGAS REVIEW-JOURNAL

Two months after picking themselves up off the floor, stocks in gambling-related companies are losing steam again.

On Tuesday, Applied Analysis of Las Vegas reported stocks in its monthly gaming index lost 2.9 percent of their value in June, the first decline since March.

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The "V-shaped recovery is off the table," Rich Moriarty of Union Gaming Group said, describing stock market charts. "I think even the U-shaped' recovery is off the table at this point."

The June index of 10 gambling companies fell 7 points to 233.03. The index hit 667.09 in October 2007 and fell as low as 189.50 in March.

"The worst is over, but we're certainly not out of the woods yet," Moriarty said of gambling stock values.

The stock index covers major Las Vegas companies such as MGM Mirage, Wynn Resorts, Boyd Gaming and Las Vegas Sands and is important because stock values can dictate how much money the companies can access to invest in their businesses.

With visitation to Las Vegas declining and room inventory increasing, the law of supply and demand is working against companies' desire to push room rates up.

Consumer confidence, although not at the lows seen early this year when it appeared several banks were on the verge of collapse, fell slightly in June just like the gambling stocks. That indicated consumers are less likely to spend on luxuries like Las Vegas vacations.

"Home prices and employment, in my opinion, matter more than anything else," Moriarty said.

The index showed a disconnect between values for casino operators and gambling equipment manufacturers, with operators faring worse.

Casino operators' collective stock value fell 10.2 percentage points, and the stock value of manufacturers increased 3.2 points.

Analyst Brian Gordon of Applied Analysis, who compiled the index, said investors might be betting manufacturers will benefit from governments approving new gambling jurisdictions to generate taxes and alleviate budget problems.

According to a recent analysis by Bank of America and Merrill Lynch, there are 12 gambling proposals in 11 states that could be good for manufacturers.

Combined, the proposals, if fully implemented, could result in demand for 173,000 new gambling devices in 2010 and beyond, which would bode well for manufacturers.

On the index, International Game Technology (IGT) , up 8.4 percent on the month to $16.23 per share, and Bally Technologies (BYI), up 6.3 percent to $28.57, were the only stocks that increased in June.

Two of the three biggest falling stocks belonged to Las Vegas-dependent companies, MGM Mirage and Boyd.

MGM (MGM) stock fell 25.4 percent to a $6.91 average price in June. Boyd (BYD) fell 13.6 percent to $9.08.

Shares of Pinnacle Entertainment (PNK) , with casinos in Indiana, Louisiana and Reno, among other locales, lost 10.1 percent in June, falling to $10.64.

Moriarty and Gordon said managing casinos will continue to be a challenge as long as consumers are hoarding cash and in fear for their jobs.

"From an operator's perspective, the depth and breadth of the national recession is continuing to impact investor expectations," Gordon said.

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. Free Nevada wrote on July 01, 2009 12:49 AM: Woah, Russia just closed all its casinos, except for designated far-flung locations. I wonder if those far-flung locations will be connected with a maglev. Free Nevada wrote on June 30, 2009 11:27 PM: "Gambling-related stocks down 2.9 percent in June " and the casino-stocks were down too, nyuck yuk yuk. Dude, it's 99F at 11:20pm..we're entitled to a little humor. Seriously, we need the government-funded $40B 350mph maglev to SoCal constructed with 20,000 otherwise unemployed construction workers (who will feed and school the next generation while immediately creating a pop in Vegas) or the Indians 2-3 hours closer to the customer base will eat the lunch of whatever is left standing out here as the economy stabilizes. (Notice I did not say "recover"...but that's a post for another day.) ex gambler wrote on June 30, 2009 06:23 PM: And the new taxes going into effect on July 1, 2009 won't help the matter either. Prices are going up while wages and standards of living are going down. We have eliminated going out to dinner and are starting to rethink other entertainment options as well. Locals casinos have not seen the worst as locals are being squeezed from every angle. bill wrote on June 30, 2009 03:46 PM: Dear What a Surprise The people who are running the casino's have not a clue. They are acting like this to shall pass. They were raising prices through the roof when people were using their home as a ATM. those days are gone and will not be back for many years if ever. What makes matters worse is that the bank know that the casinos and the rest of the world is over leveraged and the bank are holding onto their "tarp" money for dear life. The casino's have leverage costs that are eating them alive with no end in sight. The more they comp the less the gambling revenue. The casino personnel are't listening to the street, the gamblers are saying in no uncertain terms " We was Robbed" Waitaminute wrote on June 30, 2009 03:45 PM: That's correct. You have to give to get. If they tighten up their games they wonder why no one will play and blame everything and everyone other than their own management and business model in a down economy. What a Surprise.... wrote on June 30, 2009 03:26 PM: Publicly traded casinos just don't get it. Their bean counters think the way to increase earnings is to pull back on the player comps and reduce the payback percentages on the casino games. If the casinos were run by individuals who had a clue about gambling they would not be in the predicament they are in today. Benny Binion, Bob Stupak, Sam Boyd and to a lesser degree Steve Wynn knew how to run a casino and turn a profit. When business is down, you provide incentives to draw in the customers. It's basic business 101 that these bean counters just don't understand.