Casino stocks hit new lows
By DONALD WITTKOWSKI
Staff Writer, 609-272-7258
Published: Tuesday, October 07, 2008
ATLANTIC CITY - The heart-pounding action at Atlantic City's blackjack tables and roulette wheels seems tame compared with what is happening to casino stocks on Wall Street.Like other sectors, casino shares tumbled in Monday's market meltdown. But gaming stocks have been getting hammered for months in an abysmal performance.Shares of Trump Entertainment Resorts Inc., operator of Donald Trump's three casinos, skidded to 90 cents at one point Monday before closing at 99 cents - cheaper than a soda at Wawa. Trump's stock is down nearly 90 percent from its 52-week high of $8.87.Boyd Gaming Corp., owner of Borgata Hotel Casino & Spa, fell to a new low of $6.32 before closing at $7.20. Boyd's shares have declined 84 percent since reaching a 52-week high of $45.40.Shares of Pinnacle Entertainment Inc. also hit a new low, more bad news for a company that has delayed construction of its proposed $1.5 billion to
$2 billion Atlantic City megaresort because of the global credit crisis. Pinnacle, which closed at $5.35 per share after dipping to $4.86 during the day, has seen its stock fall 82 percent from a 52-week high of $29.75.
Interestingly, the market value of some gaming companies is now a fraction of the worth of their casinos and cash flow. For instance, Trump Entertainment's market value has plummeted to a mere $31.4 million, an amount significantly lower than the $50.2 million in gaming revenue generated by the company's flagship Trump Taj Mahal Casino Resort in August alone."Perhaps I may be one of the few people in America who thinks Trump may be a steal right now," Frank Fantini, who tracks casino stocks as publisher of Fantini's Gaming Report, said of Trump Entertainment's current share price.Fantini explained that the downturn in gaming stocks coincided with the cut in consumer spending months ago, when the economy began to slow. Consumers simply are focusing on buying essentials such as food and gasoline instead of going to the casino for gambling sprees, he said."People just aren't spending," Fantini said.Fears about the global credit crisis have added to the economic woes of an industry that carries more debt than most and has been deprived of the financing it needs to fund major construction projects."The casino operators are caught in two difficult pieces. The first is a weak consumer and the second is the frozen credit markets," said Nick Danna, a vice president and casino equity analyst at Sterne, Agee & Leach Inc.Soaring airfares, the mortgage debacle and overbuilding are pinching casino companies in Las Vegas and the Chinese gambling enclave of Macau.Atlantic City and other regional jurisdictions heavily dependent on daytrippers are being hurt by high gas prices and intense competition that has cannibalized the markets. Smoking restrictions in Atlantic City, Colorado and Illinois also have been blamed for a decline in business. Those concerns, in turn, reflect in Wall Street stock trading."Atlantic City has issues of its own - weak consumer spending, high debt, increased competition and a smoking ban. Combine those four things, and you get stock that's lower than a dollar," Danna said, alluding to Trump Entertainment.As terribly as casino stocks have performed, Danna and Fantini still see buying opportunities. Danna likes slot manufacturers Bally Technologies Inc. and WMS Gaming, as well as casino operators Ameristar and Penn National Gaming.Fantini is leaning toward regional casino companies, such as Ameristar, Pinnacle, Boyd and Isle of Capri. He also thinks Trump Entertainment is a possibility because of its new $255 million hotel tower at the Taj Mahal and the pending $316 million sale of Trump Marina Hotel Casino that will help ease the company's long-strained balance sheet.E-mail Donald Wittkowski:DWittkowski@pressofac.com
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