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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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