Gaming stocks jump on rise in Las Vegas visitor volume

Gaming stocks continued a major upsurge today on more bullish economic news -- the announcement of a 9.1 percent jump in passenger traffic at McCarran International Airport in January.

Leading the pack were the big Las Vegas casino operators, which were up sharply following strong gains on Thursday. And stock prices for slot manufacturers were also up today after a mixed performance Thursday.

Harrah's Entertainment soared 12.1 percent in early afternoon trading after closing 6.2 percent higher Thursday.

An order imbalance caused a 17-minute halt in trading of Mirage Resorts, which ultimately opened 7.5 percent higher today after a 9.7 percent gain Thursday.

Circus Circus Enterprises, which was upgraded by two Wall Street investment banking firms, jumped 7.2 percent today, adding to Thursday's 4.2 percent rise. Both Merrill Lynch and CIBC Oppenheimer & Co. raised their ratings on Circus stock.

MGM Grand Inc. rose 6.3 percent today after soaring 8.9 percent Thursday.

Analysts attributed the price rises today and Thursday to a host of strong earnings reports, news of yet another month of increased traffic at McCarran and anticipation of higher-than-expected financial releases by Mirage and Circus next week.

Both Las Vegas-based casino operators are expected to report earnings that, although certain to reflect lofty expenses associate with their new resorts, could exceed per-share earnings estimates and improved cash flows.

"The evidence is now considerable that Las Vegas' long nightmare is ending," Dave Ehlers, chairman of Las Vegas Investment Advisors Inc., said today.

"There aren't enough hard facts to make an absolute determination that a bull market for gaming operators stocks is at hand. But the odds have improved dramatically as the air carrier data and rising room prices have come into view."

On Thursday, the GAX index of 14 gaming industry stocks rose 8.27 points, or 4.8 percent, and the Las Vegas Sun Casino Stock Index increased 29.22 points or 4.3 percent. By midday today, the GAX had tacked on another 6.3 percent gain.

Share prices of some big slot manufacturers fell Thursday due to Wall Street's concerns over potentially punitive legislation that purportedly would ban revenue-sharing slots in Nevada.

Today, however, sentiment grew that the mere threat of the proposed ban might lead to negotiations between International Game Technology, the world's largest slot manufacturer, and casino operators that could result in a compromise and forestall the introduction of the bill in the current legislative session.

By midday, IGT stock was up 6 percent from Thursday's close, Anchor Gaming up 3.5 percent, Casino Data Systems 7.4 percent higher and WMS Industries up 6.5 percent.

Station Casinos stock soared 6.7 percent by midday today, following its 4.9 percent gain Thursday, while Boyd Gaming was up about 3 percent today following a similar increase Thursday.

Thursday's trading in Mirage approached 5 million shares, as holders of about 12 million shares sold short moved to cover their positions before the price moves much higher.

By midday today, Mirage had traded more than 2.5 million shares and was at $18.9375, up $1.3125. The stock price has climbed from $13.0625 a share in a few weeks.

Data released by McCarran officials Thursday indicated 2.5 million passengers passed through the airport in January, up from 2.29 million in the year-earlier month. The increase was the fourth straight month of improved traffic and the highest January jump in five years, McCarran said.

Southern Nevada's visitor volume has been on an upswing since October, when Mirage opened its $1.6 billion Bellagio, the first of a wave of new resorts.

In coming months, Mandalay Bay, The Venetian, Paris-Las Vegas, the Resort at Summerlin and expansions at other properties are expected to stimulate new demand for Las Vegas visitation.

Before today's increases, stock prices for slot manufacturers were mixed Thursday, as the jockeying between game makers and casino companies over revenue-participation games caused some heavy selling.

IGT stock slid just 6.25 cents on volume of 2.6 million shares, more than 10 times normal daily trading volume. Thursday's action included a 750,000-share block.

Anchor Gaming finished up 50 cents on the day after trading off as much as $2.50, but Alliance Gaming and Silicon Gaming both lost ground.

WMS Industries, maker of the popular Monopoly series of slots, rose 6 percent in active trading.

Ladenburg Thalmann & Co. gaming analyst Andrew Zarnett downgraded Anchor Gaming to "long-term buy" from "buy," citing resort operators' anger over IGT, the world's largest slot maker, and the revenue-sharing slot issue.

"We do not believe the negative sentiment shared by resort operators will dissipate in the near future," Zarnett said.

"Anchor Gaming is caught in the crossfire. While its fundamentals continue to be strong, we don't believe Anchor can step to the side as the actions against IGT continue."

Zarnett said there is "little rationalization" for Anchor to trade at its current price of about $42 a share, as that's below a reasonable multiple for a company with such a strong cash flow and balance sheet.

But, he said, while the price could eventually reach $78 a share, "given today's circumstances, risk has accelerated."

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