MGM Mirage (MGG ) shares gained as much as 2% Thursday after a Wall Street analyst said there's still plenty of room for the stock to roar.
Although the stock is at 52-week highs, it will rise further to hit $87 over the next year, contends J.P. Morgan's Harry Curtis, who on Thursday raised his price target to that level from $72.
In reaction, shares were up 71 cents, or 1.0%, at $72.75, after hitting $73.50 earlier in the session. MGM Mirage and other big casino company stocks have been on a roll this year, with the Dow Jones U.S. Gambling Index up about 32% in 2004.
Booming Las Vegas business, MGM Mirage's pending acquisition of Mandalay Resort Group (MBG) and increasing opportunities abroad could boost the company in the new year, Curtis wrote in a research note. (J.P. Morgan does and seeks to do business with companies covered in its research reports.)"The stock remains one of our favorite picks to outperform the S&P 500 in 2005," Curtis wrote. "Our thesis of pricing strength in Las Vegas and the first-quarter 2005 merger with Mandalay driving 20%-plus EPS growth is as powerful in early 2005 as it was in early 2004 when we initially recommended MGM Mirage." Curtis views near-term trends on the Las Vegas strip as bullish. "Recently, we spoke with several casino operators in Las Vegas who confirmed our positive forward room pricing data for the New Year's holiday week," he wrote. "Most hotels are either sold out or are reserving 1% to 2% of their rooms for either the highest rollers or last-minute cash-paying customers willing to spend at least $500 a night for a room." But more important, contends Curtis, is that room prices for January and February continue to increase. Going forward, MGM Mirage is poised to benefit from gambling expansion abroad, Curtis wrote, noting that on Wednesday the government of Singapore announced it will accept preliminary proposals on a casino resort as it decides whether to open the island state to Las Vegas-style casino gambling. MGM Mirage has already announced developments in the Chinese enclave of Macao and the U.K., where the government is working to liberalize gaming.