Gaming Stocks A "Sure Bet" Despite Low Earnings

Wednesday, 6 Dec 2006 | 6:30 PM ET
Las Vegas, Nevada
Las Vegas, Nevada

Gaming is one of the best-performing sectors recently. Investors, Wall Street and private equity are all eyeing these – supposedly – recession-proof stocks. The constant cash flow is pretty attractive, too.

But what’s interesting is that casinos stocks seem to be on the rise despite some less than stellar earnings. CNBC's Jane Wells was on “Street Signs” with Erin Burnett. She pointed out that Stations Casinos is up 40% in the past month – helped in part by that buyout offer earlier this week – but that only a month ago the Las Vegas casino saw a 51% drop in quarterly earnings and lowered its outlook for 2007.

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Regardless – Kirk Kerkorian, Carl Icahn, the firm Morgan Stanley and others are investing billions in the sector. The cash, real estate and hard assets are apparently too good to ignore.

Bear Stearns gaming analyst Joe Greff chose Pinnacle Entertainment as the stock to watch. It’s a regional riverboat casino that generates $210 million. Greff says that developments for the company in Louisiana, Missouri and Atlantic City could triple that EBITDA over the next five years.

Analyst disclosure: Bear Sterns is a investment banking client for IGT, MGM, PNK and WYNN.

Big Play on Casino Stocks
A look at the reasons the gaming industry is the new darling of blue-chip investors, with Joseph Greff, Bear, Stearns Managing Director of Gaming Equity Research, and CNBC's Jane Wells.

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  • Brian Sullivan is co-anchor of CNBC's "Street Signs."

  • Co-anchor of CNBC's "Street Signs," Amanda Drury is based at the network's global headquarters in Englewood Cliffs, N.J.