Shares of Ameristar Casinos dipped Friday after an analyst downgraded the casino operator, saying buyout speculation is unwarranted and noting several legislative hurdles.
Prudential Equity Group analyst Joel Simkins lowered the company's rating to "Underweight" from "Neutral Weight" and cut his price target by $5, to $29.
In a client note, Simkins said speculation that the company would be taken over quickly following the sudden death of Chief Executive Craig H. Neilsen is not likely to be validated.
Neilsen died unexpectedly in his sleep in November at his home in Las Vegas. President John M. Boush was named Ameristar's new CEO. The 65-year-old Neilsen was Ameristar's majority shareholder.
"Based on management statements and the desire of Craig Neilsen to see Ameristar remain independent, we think the company will remain a standalone for several years to come," Simkins wrote.
He also said the likely passage of a smoking ban at Colorado casinos is a near-term challenge for Ameristar's Black Hawk site, which is in the midst of an upgrade. Meanwhile, the likely passage of legislation expanding commercial gaming in Kansas is a potential hurdle its Kansas City property, he noted. The legislation presumably would mean more competition for the property.
Furthermore, Simkins is cautious on Ameristar's St. Charles, Mo., property as rival Pinnacle Entertainment looks to open two new casinos in the market next year.
"Despite a new hotel tower that will be 'best in class' for a regional casino and other improvements, we find St. Charles to be vulnerable to new capacity," he said.
Shares of Ameristar Casinos have traded in a 52-week range of $16.73 to $34.73.