 Weekly Gaming Archive
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The Passed Seven
by Paul Larson (TMF
Parlay)
MARKET CLOSE 6/27/97 7/3/97 Nasdaq Composite: 1438.15 1467.61 (+2.05%) S&P 500 (SPX): 887.30 916.92 (+3.34%) CBOE Gaming Index (GAX): 213.94 206.38 (-3.53%)
Chicago, IL (July 4, 1997) -- The bull market was alive and kicking during this holiday shortened week of trading. Alan Greenspan and his cronies decided to leave interest rates alone this week, which really sparked a fire under the Blue Chips. You would think that keeping low interest rates would help the gaming stocks, which tend to carry a lot of debt, right? Guess again. Wall Street rained all over gaming's parade this week. Where the broad market and gaming have been diverging for months on end, this week was the worst weekly divergence we have seen to date with gaming stocks lagging the S&P500 by nearly 7%. Let's take a look at exactly how bad the GAX index has done over the past year:
July 4, 1996 July 4, 1997 S&P 500 672.40 916.92 +36.4% CBOE Gaming Index 290.79 206.38 -29.0%
Forgive me if I sound sensationalist, but gaming stocks have been absolutely terrible investments over the past year. Their underperformance is getting dangerously close to the ridiculous territory. While the bear market in gaming has been well documented here for months on end, this week finally found the popular media crawling all over the gaming story. If I were a contrarian, my eyes would be wide open and staring at this sector. The performance and press the gaming industry received this week was downright bad.
While I've heard more than my share of Mayhem Mike Tyson jokes this week, they hardly seem funny when looking at the damage that story caused the sector. In case you've been in a coma, the Mike Tyson-Evander Holyfield fight at the MGM GRAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGG)") else Response.Write("(NYSE: MGG)") end if %> last Saturday night went something less than smooth. Tyson was disqualified from the heavyweight bout after he literally chomped off a piece of Holyfield's ear during the third round. Needless to say, the crowd became slightly unruly and gaming at the MGM was shut down for two hours while the situation was taken under control. While losing gaming for a handful of hours is bad enough, the public relations nightmare has just begun for MGM. The days and nights surrounding the fight were still good ones for Las Vegas with all the high-rollers in town for the fight, but it was obviously somewhat of a disappointment to have Saturday night go as it did.
As if having Hard Copy show a miniature riot at the MGM was not bad enough, that was only the start of the bad news for the gaming stocks. Wednesday saw CNBC show a less-than-favorable piece on the gaming industry that was highlighted by an interview with Donald Trump. While Trump said he was bullish on his company, he had some rather interesting things to say about the industry. The two catch phrases seemed to be "overcapacity" and "competition." Needless to say, the television piece dropped gaming stocks across the board on Wednesday.
And just when you thought it could not get any worse, CNBC decided to run a follow-up piece on Thursday about how bad gaming stocks have performed over the past year. The underperformance charted above was shown and the two dreaded catch phrases were used repetitively again. You can find short transcripts and overviews of the segments posted on the Fool's gaming message boards on both AOL and the web.
There was a silver lining, however. MIRAGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MIR)") else Response.Write("(NYSE: MIR)") end if %> and Foolish fave ANCHOR GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SLOT)") else Response.Write("(Nasdaq: SLOT)") end if %> were given positive mentions towards the end of the series of reports. Mirage was touted as what I'll call the "universal love" of the analysts due to "it's excellent management, strong balance sheet, and its innovative gambling houses." Anchor's strong business model was cited, as was its success in growing revenues and net income for 18 consecutive quarters. Anchor was even called the "Microsoft of gaming." This Fool thinks IGT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IGT)") else Response.Write("(NYSE: IGT)") end if %>, with its fingers in just about every gaming-supply pie, more aptly fits that description, but who's to argue.
Enough about the bad press, let's get to what little substantive news there was this week. HARVEY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HVY)") else Response.Write("(NYSE: HVY)") end if %> announced that it has reached an agreement with its partner in the Las Vegas Hard Rock casino, Peter Morton, and that Morton will be buying out Harvey's management contract and a 40% equity stake in the unit for $45 million in cash. I wrote of this deal last week when it was not yet completed, but it looks like Peter Morton jumped the gun by announcing the deal before all the details could be worked out.
While many investors may be concerned about Harvey's losing its high-margin Las Vegas presence (Harvey's closed down a point after the deal was announced), this Fool thinks that Harvey's is getting a good shake. The $45 million in cash will go a long way towards cleaning up Harvey's balance sheet while the company retains ownership of its three fully owned and newly renovated casinos.
AMERISTAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASCA)") else Response.Write("(NYSE: ASCA)") end if %> received a "stable" outlook from Standard and Poor's this week. The company is busy building a casino in Las Vegas named "The Reserve" that will compete for the local market in the Green Valley area. It will be an uphill battle for Ameristar to compete directly with newly opened Sunset Station. Where prospects may not be the best in Last Vegas for Ameristar, its existing properties generate roughly $40 million in annual EBITDA (earnings before interest, taxes, depreciation, and amortization) in markets that are not in great flux.
SILICON GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SGIC)") else Response.Write("(Nasdaq: SGIC)") end if %> announced that it has stepped up placement of its hit Odyssey video slot machines. The machines can now be found in ten different casinos around Nevada, with placements in Atlantic City anticipated in the near future. Silicon's stock had been lagging and the short yet very positive "wake up" press release from the company boosted the stock $1 3/4 to $14 on Thursday.
There were two name changes and mergers completed this week that deserve a quick mention. COIN BILL VALIDATOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBVI)") else Response.Write("(Nasdaq: CBVI)") end if %> has changed its name to GLOBAL PAYMENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GPTX)") else Response.Write("(Nasdaq: GPTX)") end if %>. Also, BOOMTOWN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BMTN)") else Response.Write("(Nasdaq: BMTN)") end if %> is no longer publicly traded since the company's merger with HOLLYWOOD PARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HPRK)") else Response.Write("(Nasdaq: HPRK)") end if %> was completed this week.
Winners and Losers
Even though the gaming sector was rather weak this week, there were very few stocks that fell dramatically. In other words, it was a broad but not severe drop in the gaming stocks this week. The most notable mover had to be AUTOTOTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TTE)") else Response.Write("(AMEX: TTE)") end if %>. Autotote moved on news that the company plans to privately place $100 million worth of senior debt in the company. It is not clear to this Fool what the company plans to do with all that cash, but it will certainly help the liquidity of the gaming software specialist.
Top percentage movers (stocks over $1)
Winners Closing Price Weekly Move Autotote (TTE) $2 1/16 +83.3% Global Casinos (GBCS) $3 3/8 +20.0% Shuffle Master (SHFL) $8 7/8 +18.3% Casino Data (CSDS) $4 1/8 +17.9% Losers Closing Price Weekly Move Butler National (BUKS) $1 1/32 -23.3% Players Intl (PLAY) $2 13/16 -11.8% Lady Luck (LUCK) $1 9/16 -10.7% Innovative Gaming (IGCA) $5 3/8 -10.4%
Quarterly Earnings Summary
I could not find any earnings to speak of this week. This is the calm before the storm, however. There are going to be plenty of earnings to digest in the coming weeks.
Did You Know...
Dice games are also illegal in England? This is because Queen Victoria caught
some of her troops rolling the bones while on duty. (Thanks to
[email protected] for this week's
tidbit!)
Have a happy and safe Fourth everyone!
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