This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Slots Slow at Dover Downs

Shares of Dover Downs (DDE - Get Report) fell 9% Wednesday after the Delaware State Lottery Office said slot proceeds at the company's race track dropped during the second quarter.

As a result, the company could be in danger of missing analysts' revenue estimates when it reports results later this month.

The Delaware State Lottery Office said net video lottery proceeds at Dover Downs totaled $51.6 million in the second quarter, down from $55.4 million in the first quarter. The numbers likely spooked investors since Wall Street had expected Dover Downs -- which receives the bulk of its revenue from the lottery (slots) -- to post roughly flat second-quarter revenue.

Analysts, on average, project total second-quarter revenue of $59.2 million, compared with $59.3 million in the first quarter.

The drop was a victory for short-sellers who have been increasingly betting that the stock is poised for a fall, after showing a strong momentum swing to the upside in recent months. Last month, the stock had an 81% increase in short interest.

The shares have jumped from $17 to $20 in recent months on no news, except for a stock split. On Wednesday, the stock fell 8.8% to $18.35.

"Dover Downs, although a well-run company, seems fairly pricey to us for a basic Delaware operation," says Steven Gart, a senior investment analyst with Nickel Capital, a hedge fund that has a short position in the stock.

According to Gart's model, the company trades at approximately 10.5 times 2007 earnings before interest, taxes, depreciation and amortization. This ranks the company just behind Las Vegas Sands (LVS - Get Report)and Wynn (WYNN - Get Report) as the most expensive gaming stocks on comparable enterprise value-to-2007-EBITDA ratios.

But whereas Las Vegas Sands and Wynn have substantial growth opportunities in Macau, Dover Downs owns just one race track operation in Delaware.

Dover Downs couldn't be reached for comment.

"On a fundamental basis, Dover's price multiple doesn't seem to make sense when the average small-cap operator trades at or around eight times 2007 EBITDA," Gart says. "The 30% premium seems like an unwarranted valuation anomaly especially given new competition coming online in Pennsylvania from the likes of Harrah's (HET)."

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DDE $1.08 0.00%
LVS $45.15 0.00%
WYNN $88.30 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs