Ticker Tape: Betting on the Station
06/13/2003 12:00 am EST
Leo Fasciocco, editor of The Ticker Tape Digest , reads thousands of charts to find those issues that are breaking out of trading patterns. His latest breakout feature is Station Casinos. For the technically-inclined, he notes, "the stock broke out from double-bottom W base on very bullish tape action, and net up tick volume is extremely bullish with good institutional interest and excellent accumulation." Here's his overview of the company.
"Station Casinos (STN NYSE) is based in Las Vegas, owns and operates gaming complexes targeting mainly local gamblers as opposed to tourists. Annual revenues are $800 million. STN operates the Palace Station, Boulder Station, and Texas Station hotel casinos. It also operates the Wild, Wild West Gambling Hall & Hotel. Station's properties feature hotels, as well as slot machines, table games, and amenities such as restaurants and entertainment. The company also owns 50% of Barley's Casino & Brewing Company and Green Valley Ranch Station Casino. "The firm has also been opening casinos in California. Its latest venture is the Thunder Valley Casino. It is also is in a partnership for the building of the big Borgata Hotel Casino which opens this year in Atlantic City.
"Earnings for the second quarter should climb 17% and in the third quarter 142%. That acceleration in growth should push the stock higher. This year, we are forecasting a hefty 58% increase in earnings. We see net coming in at $1.09 a share, up from 69 cents a year ago. Going out to 2004, we see profits climbing another 32% to $1.44 a share and for 2005, an additional 26% to $1.82 a share. The stock sells with a modest price-earnings ratio of 23.
"Following its recent breakout, we would take a full position in this stock now in anticipation of an advance to 30 within the next few months. A protective stop can be placed near 22. We rate STN a very good intermediate-term play since earnings growth will continue for several quarters. The stock can double in 12 to 18 months. The largest fund holder is Janus Special Equity Fund with 2.9% of the stock. It was a recent buyer of 101,000 shares. A big buyer recently was Baron Growth Fund, 5-star rated. It purchased 525,000 shares. Insiders were buyers in early May at 21. The key buyer was CFO Glenn Christenson who purchased 49,999 shares with options. Insiders were buyers back in February at 17. They were right then. We see them as right again and view this insider activity as very bullish."