Deutsche Bank initiated coverage of a number of names in the gaming industry. The firm rates Station Casinos (STN) and MGM Grand (MGG) strong buy, and Harrah's (HET), Mandalay Bay (MBG), and Park Place (PPE) buy.
Analyst Marc Falcone says he has a favorable position on the gaming industry. Among the factors he cites: 1) EPS transparency and top-line visibility; 2) recession resistance; 3) solid performance of regional markets and a rebound in Las Vegas; 4) an increasing focus on managing for total profitability; and 5) a low supply growth environment, which should drive increasing levels of free cash flow, improving balance sheets. He thinks companies with high levels of exposure to Vegas and the ensuing rebound in trends are likely to be the stronger performing names.