 Online
gambling stocks showing decline
Online casinos have
enjoyed unbelievable growth on the Internet in recent years, and
this explosive expansion has come with much scrutiny and has
created an incredibly crowded marketplace, as online casinos
spring up left and right. But the current state of online
casinos is healthy and ripe with new developments and news. The
industry is always exciting despite mainstream society’s recent
reservations.
The latest research on online casinos shows that there are still
substantial growth opportunities in the online casinos industry
in months and years to come, even though stock prices of online
casinos have dropped.
The study’s online casinos growth prediction parallels the
predictions of other highly regarded and dependable surveys and
studies conducted about the industry around the globe. The new
study estimated that worldwide online casinos and gambling
revenues were $11 bullion in 2005, up from about $8.5 billion in
2004.
Online casinos industry investors found themselves snorkeling in
July, as online casinos company stocks closed down for the third
month in a row.
The Dow Jones U.S. Gambling Index, a Dow Jones & Co. industry
index of 64 publicly traded casino and online casinos companies,
closed at 525 Monday, down 6.25 percent from 560 at the end of
June.
Analysts said values declined both because investors were
correcting for inflated values and are expecting weak results
for the remainder of the year.
Bear Stearns analyst Joe Greff said online casinos stocks have
been on a downturn since at least mid-May because of broad
concerns that the industry is weakening and because there has
been little news to instill confidence.
He cited recent second-quarterly earnings reports by Boyd Gaming
Corp. and Harrah's Entertainment in which the companies failed
to meet market expectations.
The Dow Jones gaming index has dropped 16 percent in the past
three months since hitting a high for the year in early May of
622.
For both July and the three months ending July 31, casino and
online casinos company stocks performed substantially worse than
the Standard & Poor's 500 index, which closed Monday at
1,276.66.
This reversed a trend in which gaming stocks have generally
outperformed the S&P 500 for the past four years.
"Investors are taking profits after a multi-year (market)
outperformance by gaming stocks and rotating them into other
sectors that have been beaten down," Greff said. "The
fundamentals of the gaming industry are still strong."
Nevada-based gaming companies, the largest in the industry, all
trailed the Dow Jones casino index.
Brian Gordon, a partner in the Las Vegas-based financial
consulting firm Applied Analysis, said local gaming company
stocks have seen some price run-ups in recent months and are now
going through a minor midcourse correction.
The Applied Analysis Gaming Index, a weighted average of nine
Nevada-based gaming companies, closed July at 353.36, up 6.1
points, or 1.7 percent, from June. When computed on a similar
weighted average basis, the S&P was up 0.6 percent for the
month.
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