Shares of Lakes Entertainment Inc., which develops and operates American Indian-owned casinos, surged Thursday after an analyst started coverage with a "Buy" rating, saying the company's tribal management pacts are not fully valued.
Justin Sebastiano of Morgan Joseph & Co. said Lakes should reap the benefits of agreements with Native American tribes for casino projects in Michigan, California and Oklahoma.
"These contracts typically constitute very little, if any, capital investment but have the potential to generate significant cash flow over the term of the contract," the analyst wrote in a client note.
Sebastiano anticipates its Red Hawk tribal casino will significantly add to results next year after it opens.
The analyst provided a $10 price target.
Shares of Lakes Entertainment added 50 cents, or 9.2 percent, to $5.92. Over the last year, the stock has traded between $3.86 and $12.50.
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