SOURCE: Rothman Research

Rothman Research

April 16, 2010 08:39 ET

The Gambling Industry -- a Risky Bet!!

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 16, 2010) - -- This recession, along with its endless negatives, has proven to be a myth-buster for the casino industry which has long toughened its stance as a recession-proof sector. After a 4.6% decline in revenue in 2008 followed by another 5.7% tumble in 2009 throughout the United States, the casino industry feels more vulnerable than ever. Making matters worse has been the sharp decline in the number of people visiting the Sin City par excellence, Las Vegas. As the economy continues to remain weak, even in light of apparent signs of recovery, people are still wary of their budgeting and prefer to stay home rather than partying and gambling in Vegas casinos and resorts. After a brief rally on hopes that the gambling sector was making progress last week, the industry might soon dive in red territory following MGM Mirage's (NYSE: MGM) announcement that it is anticipating a broader first quarter loss. Yesterday after the close, shares of MGM collapsed by 6%.

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The economic downturn did not only affect gambling companies but it also had a huge impact on those companies that supply casinos with their gaming machines of all sorts. Casino equipment makers are also feeling the full substance of the recession and it is mainly due to their dependency on casino companies. With casinos making less money (not to say losing money) and attracting less visitors, demand for new machines has dipped. Operators in this segment of the industry are also been affected by apprehensions regarding near-term slot visibility amongst others. "Some experts believe that a decline in casino equipment makers share prices is actually a good time to take position in these stocks as an economic recovery would start to bring more gamblers to casinos which translates to a regain in business," commented Jack Benassi of "One of my favorite players in this space is WMS Industries Inc. (NYSE: WMS). The company will be reporting its fiscal 2010 3rd quarter on April 26th."

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The earnings season might prove to be a bumpy ride for the casino industry, but with economic recovery starting to clear the recessionary clouds and the holiday season approaching, this industry could see a remarkable turnaround.

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