Has MGM Mirage (MGM) finally hit bottom?

MGM MIRAGE (Public, NYSE:MGM) is down a massive 72% in the last 52 weeks. However, today the stock is up 7% thanks to help from WYNN resorts. Let’s take a look and see if the stock is worth a long buy, or if MGM still has room to slide.

On June 27th, Dennis Forst downgraded shares of MGM Mirage to "Hold" from "Buy" .He said spending is down in all U.S. gaming markets and will probably keep getting worse. He added that results in Macau have been strong, but somewhat weaker than Wall Street had expected.

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MGM stock "has been in free fall for most of the past three months as investors came to grips with the recessionary reality," Forst said. He thinks MGM and Wynn both have strong growth prospects, but the stocks will suffer while investors expect U.S. economic weakness to hurt their results.

An analyst for JPMorgan downgraded MGM shares to "Neutral" from "Overweight" Thursday and lowered estimates for companies operating casinos on the Las Vegas Strip. Joseph Greff said high gas prices and cuts in airline capacity are eroding hotel occupancy and spending in Las Vegas, which is encouraging the companies to offer discounts.

The chart isn’t pretty. Buying into this downtrend could be a recipe for disaster. 

My thoughts are give it a couple more months, maybe even a year before looking for value plays in the gaming sector. In spite of that, MGM could be an acquisition target at these levels.

In 2009, the MGM plans to finish its new City Center project which could spark some life into the stock. Here are some notes from the CityCenter Website:

When completed in 2009, CityCenter will be one of the great urban places of the world, a reflection of the best of the life that we’re living today and tomorrow. It will be a place of continual evolution, richness and diversity—a place people from around the world will desire to visit and experience.

Across the country and throughout the world, people are rediscovering the excitement of the
city. The city is where the people are, where the action is, and where all that’s thrilling and new comes together—whoever you are. Las Vegas will soon have its own urban core— a 76-acre city-within-a-city that’s destined to redefine the skyline. It will be an urban setting unlike any other in the United States. Or, really, anywhere. CityCenter.

CityCenter could only exist in Las Vegas— and only MGM MIRAGE, the world’s premier
developer of destination resorts, could build it. No other developer has the vision to realize
such a forward-thinking project with the same care and attention—or the experience to offer
hotels, retail and amenities that will exceed the high expectations for which MGM MIRAGE is known throughout the world.