David Anders of Merrill Lynch has issued a Buy rating on PNK. His price target is $25.
I believe this is new coverage.
His EPS estimate is 52 cents this year and 70 cents in 2006.
Note that this report is post-Katrina, yet the EPS estimate for 2006 is in line with estimates that existed before the hurricane. The reason, I'm sure, is that Anders expects business interruption insurance to take the place of any disrupted profits in Biloxi and New Orleans. (PNK-New Orleans should open soon, but PNK should be entitled to supplementary business interruption insurance payments if Boomtown-New Orleans' performance is weak because of the disaster.)
Click on the 5 year button on your graph and you'll see what I mean. IGT climbed much faster than the casinos prior to Feb 04, and then it started down. I'm wondering if that is a leading indicator that the casinos start down next. They made money by squeezing IGT, but once they are done with that, where do they go?
Still have my AZR and PNK, but always looking for signs of a top. I don't think the casinos can prosper indefinately while their suppliers stumble. The only place I have ever seen that happen is when the suppliers are in the raw-material or unfinished goods business.
Has IGT margin pressure been good or bad for the gamers? me-too slotcrack=margin pressure for IGT. I was early,but I got it right,no?
I think you may be a bit confused. When BYD took Coast leaving STN and BYD to deal to the local market,they were both able to reduce there marketing costs,less cash back,less comping,less offers. When STN and BYD can increase the floorspace given to WMS and Aristocrat because they both offer nice great games cheaper with better terms,that helps your margins. When gamers take OUT rev participation games and replace that space with Mr. Cashman etc,that improves margins,follow?
I meant leading indicator, but a leading indicator can be a coincident cotrary indicator too.
I agree that the equipment space has changed, I just think in general, they will feel an upturn or a downturn (in aggregate) before the casinos do.
<On a more productive topic, I have long thought that the equipment makers would be leading indicators for the casinos. There has been some evidence for this in the past, but I wonder if it still holds true.>
You mean contrary indicators,right? Igt,mgam,agi,the me-too slot makers have been hurt by giant gaming mergers,no? WMS and Aristocrat have passed IGT on by,GOOD for gamers,BAD for the me-too slotcrack space.
i get your drift. the matchmaker is much more likely to use thinner shafts on the matches with less phosphorous which may lead to matches breaking during striking or needing multiple strikes to light but keep the same 1,000 matches per box. If the demand for their product doesn't drop off and the prices for wood and phosphorous haven't changed, then they have expanded their margins.
I think you're splitting hairs. If a company sells boxes of 1000 matches for $1.00, and keeps the price at $1.00 but only puts 950 matches in the box, is it cost cutting or a price increase? Economists would call it a price increase (per match) and figure it into the GNP deflator and other measures of price increases that way.
In my opinion, when you change the play table on a VP machine, or the payout on a slot, you have changed the price of what the machine provides: entertainment, for a limited amount of time.
But I'm easy - if you want to call it cost cutting, that's fine.
On a more productive topic, I have long thought that the equipment makers would be leading indicators for the casinos. There has been some evidence for this in the past, but I wonder if it still holds true. The casinos have a lot more ways to take your money than they used to, and the equipment makers have lots of clients (like Indian casinos) that don't show up on the stock exchange.