Investors Bet on Vegas as Three Gaming Stocks Look Up

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Casino stocks have been winners over the past five trading days, in advance of upcoming earnings reports. Las Vegas Sands Corp. (LVS) (its Las Vegas property pictured) has risen more than 15%, and MGM Mirage (MGM) and Wynn Resorts (WYNN) were up 5%. And while the breakaway success of gaming in Macau has played a major role in escalations in the past, analysts now think Vegas itself is starting to feel a positive impact.In recent years, reports out of Vegas had been resolutely negative. As recently as last summer, MGM Mirage, long a behemoth of the Strip, was said to be discussing bankruptcy. But news from Sin City has finally in the black: Gaming revenue increased in November and December, and visitation has been up for four months. Anecdotally, rock-bottom room rates -- accommodations at the ritzy Wynn Las Vegas were going for only $100 a night -- are out of freefall.

Investors are betting on upside. "All the metrics are improving. People are getting back into gaming stocks," says Grant Gorvertsen, a principal with the Las Vegas–based boutique investment bank Union Gaming Group. Gorvertsen, a former Deutsche Bank exec, says he'd like to see the lodging spend increase.

6,000 New Rooms to Fill

Upcoming room bookings are especially important for MGMMirage, scheduled to report earnings on Thursday. The recent opening of MGM's new CityCenter, which brings more than 6,000 new rooms and condos to the Strip, had sparked fears that the complex would take sizable chunks of business from the company's other properties, such as Bellagio, MGM Grand, and Mandalay Bay. "If MGM Mirage's booking levels are going up," says Gorvertsen, "it means that CityCenter is not cannibalizing as much as was feared."

Beyond CityCenter, and for Vegas properties in general, Gorvertsen sees clearing skies and fiscal sanity. "The [casinos'] expense structures are considerably tighter," he says. "Because a lot of the fat has been cut out, you don't need to recapture all of the lost revenue to get back to peak cash flow. That is helping to make these stocks more appealing to investors."
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