Merrill Downgrades MGM Mirage

Analyst David Anders also lowered the firm's rating on Mandalay Resort Group, citing the casino operators' valuations

Merrill Lynch downgraded its investment recommendation on both MGM Mirage (MGG ) and Mandalay Resort Group (MBG ) to neutral from buy.

Analyst David Anders says that after three bullish years, he is becoming more selective on gaming stocks. He notes Merrill's gaming index is up 153% since March, 2000, while the S&P 500 is down 21%. Anders cites good stock price performance due to increased appreciation by investors for the cash flow characteristics of casino companies. He sees significant upward EPS revisions, which will likely peak in the second quarter of 2004. He has no doubt casinos' near term fundamentals will be strong; however, because of reasonable valuations, and an estimated slowing of growth rates in the second half of 2004 and 2005, he downgraded MGM Grand and Mandalay to neutral from buy.