Shares of casino operators were trading mostly lower on Friday after an analyst initiated coverage on several companies in the sector.
Prudential Equity Group's Joel Simkins gave MGM Mirage a "Neutral" rating, saying in a client note that he was optimistic about its more than $7 billion CityCenter project in Las Vegas.
But the company's stock may have hit the ceiling.
"While MGM Mirage has an impressive pipeline of domestic and international growth opportunities, we think the shares are due for a breather given a roughly 100 percent move in the stock since September 2006," he wrote.
While he is cautious on Trump due to competition from Atlantic City megaresorts being developed and newer slot facilities in Pennsylvania, Simkins said internal and external development opportunities could provide catalysts for Trump.
Simkins also initiated coverage on Ameristar Casinos Inc. with a "Neutral" rating.
In a separate note, Simkins issued an "Underweight" rating for Isle of Capri Casinos Inc. on a slowdown in Biloxi and more competition.
"After the company came up empty in Pennsylvania and Singapore, we think its growth pipeline is average at best, and we see increasing competitive challenges across the portfolio," he said.
With casinos increasingly coming back online in the Gulf Coast after Hurricane Katrina, Isle is starting to face normalized results in the market, which could lead to further estimate reductions, Simkins explained.
Simkins is particularly concerned about the possible $3.4 bilion to $3.6 billion Pinnacle may spend on new projects, saying in a client note that the amount "is significant considering the company had total assets of $1.5 billion in the third quarter of 2006."
Simkins gave Penn National Gaming Inc. and Boyd Gaming Corp. "Overweight" ratings. Penn and Boyd both look to benefit from "solid pipelines" and diversified portfolios, he explained.
Shares of MGM fell 78 cents to $69.15 in midday trading on the New York Stock Exchange.
Ameristar declined 80 cents, or 2.6 percent, to $30.28 on the Nasdaq. The stock has been trading in a 52-week range between $16.73 and $33.41. Isle of Capri dropped 65 cents, or 2.6 percent, to $24.65 on the Nasdaq. The stock has been trading between $18.98 and $34.30 for the past 52 weeks.
Pinnacle's stock dipped 37 cents to $33.43, while Boyd slipped 48 cents to $46.56 on the Big Board.