Stock prices of the gaming industry's "big three" publicly traded casino operators in May lost some of the value they gained on a wild upward swing a month earlier.
But the declines didn't filter down to regional casino operators or slot machine manufacturers, according to a report by Las Vegas-based financial consultant Applied Analysis.
MGM Mirage, Las Vegas Sands Corp. and Wynn Resorts Ltd. saw their average daily stock prices decline slightly during May, following double-digit jumps in April.
Applied Analysis, which charts the average daily stock price of six casino operators and three slot makers, said two events may have played some role in the decline. Investor speculation surrounding a hedge fund's large purchase of MGM Mirage stock and Las Vegas Sands moving to restart construction on a large portion of Macau's Cotai Strip region, 18 months after halting development, may have influenced prices, he said.
In addition, Applied Analysis partner Brian Gordon said broader market concerns, centering on the European financial crisis, negatively affected valuations during May. The result drove the company's monthly gaming index down almost 10 points to close at 332.86
"Global economic conditions notwithstanding, selected earnings reports for gaming operators suggested rates of decline in top line revenues were easing, with several anticipating conditions to turn to black by the second half of 2010," Gordon told clients in the monthly study.
New York-based Paulson & Co. bought 40 million shares of MGM Mirage, making the hedge fund the company's second-largest shareholder behind company founder Kirk Kerkorian. Paulson also acquired 4 million shares of Boyd Gaming Corp.
"The transactions resulted in upward pressure on pricing in the gaming sector as speculation swirled," Gordon said.
While the average daily share price of MGM Mirage fell 9.8 percent in May, the investment had an opposite effect on Boyd Gaming, as the company's average daily share price rose 10.1 percent during the month.
Boyd received attention during the month as the company's earnings showed year-over-year declines in net revenues across all its markets while it remained interested in acquiring all or part of bankrupt Station Casinos. Meanwhile, Boyd Gaming waits while its partner, MGM Mirage, tries to sell its 50 percent stake in Atlantic City's Borgata, which Boyd manages and owns the other half of.
Janney Montgomery Scott gaming analyst Brian McGill downgraded his assessment of Boyd, saying the continued drag on Strip results will hurt Boyd's revenues in the locals market.
"The Las Vegas economy will take longer than expected to recover," McGill told investors. "We believe one of the casualties of this will be the expectation that the Las Vegas locals market will recovery quickly. The other segments of the Boyd story are not without challenges. The downtown properties are negatively impacted by a drop in visitation from Hawaii and a cut in airline capacity."
Meanwhile, the company will face increased competition at Borgata once Pennsylvania casinos begin offering table games this summer. McGill said the potential addition of slot machines at New York City's Aqueduct Race Track could cut off visitation to Atlantic City by Long Island residents.
Even Boyd's Blue Chip Casino in Indiana could be challenged, McGill said, by additional casino offerings in Michigan.
McGill said Boyd Gaming's stock price could see an uptick if the company were to gain control of MGM Mirage's stake in Borgata or acquire some of Station Casinos' assets for a low multiple.
"Given the situation with the auction surrounding the Station assets, it does not give us confidence Boyd will end up owning any," McGill said.
Slot machine makers International Game Technology, WMS Industries and Bally Technologies all enjoyed a strong May with average daily stock prices climbing by 2 percent on average.
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871.