Ameristar Casinos jump on stock upgrade

Justin Sebastiano of Morgan Joseph upgraded the shares to "Hold" from "Sell" in a note, saying the current share price reflects the competitive pressure and weak economy Ameristar faces.

Since cutting the stock to "Sell" in March, the company's stock is down 30 percent versus a slight gain of under 1 percent in the S&P SmallCap 600 index over the same time.

Sebastiano lowered his revenue and profit estimates for the year and estimated the opening of the Horseshoe Hammond by privately held Harrah's may pressure Ameristar's East Chicago location.

"We believe there is no longer a takeover premium in the stock," Sebastiano wrote. "A premium based on takeover speculation is unwarranted, in our view, given the current high cost of capital, despite Ameristar's best-in-class assets."

The Las Vegas-based company owns eight casinos in seven markets including Greater St. Louis; Kansas City, Mo.; and Omaha, Neb.

In midday trading, Ameristar shares rose 93 cents, or 6.4 percent, to $15.43.

(This version CORRECTS the lead to say the stock is "fairly valued" instead of "undervalued." )