With US consumers struggling to pay mortgages, pay off credit cards and fill up their gas tanks, there appears to be little left over for discretionary spending. Goldman Sachs applied this reasoning to the casino sector, cutting its price targets on several big name gambling-related companies.
„We would acknowledge that in a consumer-led recession casinos’ top lines will come under pressure, but we do not think consumers will stop completely…,“ the brokerage firm wrote in a note to clients.
Some of the more notable companies targeted include MGM Mirage (MGM), which was cut to USD 17 per share from USD 32, and Las Vegas Sands (LVS), which was cut to USD 25 per share from USD 60. Wynn Resorts (WYNN), Penn National Gaming (PENN), Pinnacle Entertainment (PNK) and Boyd Gaming (BYD) also saw price target cuts.
As a result of Goldman Sachs’ slash-and-burn run through the sector, the SIG Gaming Index (SGV) has plunged more than 5.5% so far today, pushing the index to a fresh annual low. But casino stocks were in trouble prior to this morning’s brokerage action, as SGV is off more than 73% since January 2008, steadily declining under the weight of its 10-day and 20-day moving averages.
Compared to the rest of the market, the SGV’s week’s relative-strength index versus the S&P 500 Index (SPX) has been in decline mode since November 2007.