MGM Spikes on Upgrade, Sector Slips

(MGM article updated with stock prices.)

NEW YORK (TheStreet) -- MGM Mirage(MGM) is spiking after Goldman Sachs upgraded the casino operator to buy from neutral.

The brokerage firm expects Last Vegas will get "less bad" over the next several quarters. It also sees upside to MGM Mirageearnings and says MGM shares are undervalued compared with its competitors.

"MGM should also make progress on improving its balance sheet with a credit line extension, debt issuance or a capital raise from one of its joint ventures," Goldman Sachs wrote in a note.

Goldman also upped its target price on the stock to $16 from $10.

Still, Goldman did warn that the recovery in Vegas is in early stages and could come to a stand-still due to a weaker consumer or room overcapacity.

As a result of the upgrade, shares of MGM are increasing 9.3% to $11.91 in morning trading. The rest of the sector, however, is being left behind. Isle of Capri(ISLE) is slipping 1.1% to $8.52, Ameristar Casinos(ASCA) is off 4.1% to $14.89 and Empire Resorts(NYNY) is slipping 1.7% to $2.29.

Supply in Vegas has been a major concern for investors after the December opening of MGM's massive CityCenter development.

Many experts are still worried that 2010 will be another difficult year for the Vegas strip. On Monday, Standard & Poor's released a report saying the casino sector is unlikely to make a major recovery in 2010.

S&P also said that MGM, which relies heavily on the Las Vegas strip, has the biggest credit risk. Rivals like Wynn Resorts(WYNN) and Las Vegas Sands(LVS), which have a significant stance in Macau, are less risky.

-- Reported by Jeanine Poggi in New York.

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