Casino stocks continued to rally as Bear Stearns upped its price target on Station Casinos ( STN) to $48 from $40, representing a premium of 12% from Station's closing price Wednesday.

Bear Stearns analyst Mark Abramson told investors that Station's shares were worth more on a sum-of-the-parts valuation and noted that the company operating fundamentals were strong, especially in Las Vegas, where it is a leader in the so-called locals' market.

"This new price target is based on explicit valuation of individual development opportunities and relatively conservative valuation of the seven wholly owned properties," said Abramson, in his note. "

Station does face more competition in its bread-and-butter Las Vegas' locals market, where it is the market leader. But despite the fact that Coast Casinos and Boyd Gaming ( BYD) announced a $1.3 billion merger announcement, Abramson feels Station is well positioned.

"We do not expect this merger to significantly impact Station's long-term growth potential," said Abramson. "Coast is considered by Las Vegas locals to be more value-oriented than Station Casinos, which is consistent with the market positioning of Boyd's Sam's Town property on Boulder Highway, and therefore likely to remain the focus of the combined company."

Nonetheless, investors sold Station shares on Thursday, dropping the stock 62 cents, or 1.5%, to $42.08.

As analysts continue to raise earnings estimates and price targets, the rest of the sector continues to rally. (On Wednesday, TheStreet.com reported that casino stocks have been sliding even though earnings estimates have been rising .) On Thursday, the Dow Jones Casino & Hotels Index was up 1.5%, hitting a 52-week-high. The index was led higher by Boyd, which gained 49 cents, or 2.2%, to $22.49, coming within 15 cents of a new 52-week-high just after the opening bell.

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