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Howard Stutz

Future of gaming analysts uncertain

22 February 2010

LAS VEGAS, Nevada -- The sudden replacement of Susquehanna Financial Group's lead gaming analyst caused a buzz along Wall Street.

Was Robert LaFleur bounced because he was overly critical of MGM Mirage?

Did Rachael Rothman of Wedbush Morgan replace him because she offered Susquehanna restaurant and gaming coverage?

Or was Rothman hired because she spent seven years at Merrill Lynch with one of her new supervisors?

"It's a brutal business," an analyst said about LaFleur's Feb. 12 departure.

That morning, LaFleur released a weekly report charting rate fluctuations for CityCenter hotel rooms.

Six hours later, Susquehanna issued a brief research note saying that it was halting gaming, lodging and research coverage, "due to the departure of the analyst from the firm." A statement later announced Rothman's hire.

LaFleur, who was heading out of town for a planned vacation, was floored by the news. His friends in the analyst circle believe he'll resurface.

MGM Mirage shouldn't expect a free pass from Rothman, who gave the casino operator an "underperform" ranking in January. She said MGM Mirage was "overly aggressive" on expected proceeds from a planned Hong Kong stock offering.

She won't cover the 17 gaming and lodging entities LaFleur followed. Among the companies Susquehanna said Rothman would watch are The Cheesecake Factory and Chipotle Mexican Grill, along with MGM Mirage and Las Vegas Sands Corp.

"Rachael was a colleague of mine at Merrill Lynch where I witnessed first hand her client reach and impact," said Cory Carlesimo, Susquehanna's head of cash equities.

Analysts navigate a tricky field. They provide commentary on a company for a firm's clients, even if the firm has ownership in the operations.

Some analysts are viewed as too close to the companies they cover. Others are considered overly critical.

Former Jefferies & Co. analyst Larry Klatzkin got caught up in a flap over Las Vegas Sands stock in 2007. He issued a research note containing bogus information. The company disputed the report, but only after a $12 stock-price jump.

He also ran opposite of other analysts by touting Las Vegas Sands when it had lost 95 percent of its value.

In 2008, slot machine giant International Game Technology experienced financial trouble. Critical comments from Stifel Nicolaus' Steve Wieczynski prompted an IGT spokesman to call him "the analyst who hates us more than anyone."

The spokesman and most of IGT's then-management are gone. Wieczynski still follows the company.