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Casino stocks continue to plummet

24 Oct 2008

NEW YORK, New York -- Shares of some casino operators slid to new lows Thursday as the sector swooned from investor anxiety about the softening economy and an analyst said MGM Mirage's heavy Las Vegas concentration leaves it vulnerable.

The stock price of Las Vegas Sands Corp. fell to $8.21 on the same day a Pennsylvania newspaper reported the company was slowing construction on its $675 million resort on the site of a historic steel mill in Bethlehem, Pa. The Morning Call of Lehigh Valley reported the retail component of the Sands Casino Bethlehem was struggling to find tenants.

Las Vegas Sands Corp. spokesman Ron Reese said the casino portion of the project, and the retail, dining and entertainment components were on schedule to open in June. He said the plan had always been to open the project in phases. Reese wouldn't address speculation by the article's unnamed sources.

Las Vegas Sands fell $3.50, or 29.89 percent, on the New York Stock Exchange after making some slight gains from its earlier all-time low of $8.09.

In afternoon trading, the broader markets fluctuated as a mindset grew on the Street that the economy is either in a recession or headed for one despite government relief efforts and gradual improvements in world credit markets.

The casino sector, along with many other industries, has been squeezed as consumers curb spending due to the continued housing slowdown, eroding credit and escalating food costs.

Meanwhile, Nicholas Danna IV of Sterne Agee & Leach Inc. started MGM Mirage coverage with a "hold" rating and $11 price target. The analyst cautioned that MGM's dependence on Las Vegas, with more than 80 percent of its revenue coming within close proximity of the Strip, puts the casino operator in a tough spot "during a period of increasing supply and declining demand."

Danna also warned that MGM's $9.2 billion CityCenter project, set to open in Las Vegas late next year, is somewhat of a question mark as its returns are uncertain and the complex may hinder some of the company's existing Las Vegas properties.

On Wednesday, Fitch Ratings downgraded MGM Mirage on concerns about CityCenter financing.

Shares of MGM Mirage slid $1.59, or 12.78 percent, to close at $10.85. The stock reached a more than seven-year low of $9.75 earlier in the session.

Elsewhere in the sector, Wynn Resorts Ltd.'s stock dropped $4, or 8.63 percent, to $42.38 on the Nasdaq National Market. The shares sagged to $39.32 earlier, a multiyear low. Boyd Gaming Corp. closed at $4.20 on the New York Stock Exchange, down 65 cents or 13.40 percent.

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