Why Atlantic City bet big on casinos and lost

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Some blame it on outdated regulations. Some blame it on increased competition from neighboring states. Some blame it on poor or complacent management. But they all agree on one thing: Atlantic City’s casino market is crumbling, and the city will suffer because of it. With four establishments — The Atlantic Club, Revel, Caesar’s (CZR) Showboat, and the Trump Plaza — potentially shutting down or being auctioned off in fire sales by the end of this year, things are very bleak for the city’s economic outlook. Not only will thousands of jobs slip through the cracks, but fiscal conditions could face a lot of pressure.

Market Realist – Due to the casinos’ persistently falling revenues, it seems likely that four of the city’s 12 casinos will close for good in 2014.

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The graph above shows you the revenues of the gambling industry, broken down by casino. You can see that almost all of the casinos have seen declining profits from 2009 to 2012. Caesars Entertainment (CZR) has revealed plans to shut down Showboat in August, while Trump Entertainment Resorts has announced the closure of the Trump Plaza Hotel and Casino as early as September 16, 2014. The Revel too could shut down in September without a buyer.

Due to its casinos’ bankruptcy, Caesars Entertainment stocks have fallen drastically in the past few months. From $26.59 in March 2014, prices fell to $16.0 on August 1, 2014—almost a 40% fall in the space of four months.

However, competitors like MGM Resorts International (MGM), Las Vegas Sands Corp. (LVS), and Penn National Gaming Inc. (PENN) seem to be holding steady. MGM is currently trading at $26.84—up from its May lows of $23. LVS has been hovering around $75 levels for the past three months. Meanwhile, PENN is lingering around $11.

Read on to the next part of this series to learn more about the failing gaming industry of Atlantic City.

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