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ARE CAUTION FLAGS BEING WAVED ON AUTO-RACING STOCKS?
Published September 25, 1997
After a "thrill-a-minute start" Int'l Speedway (ISC) and Speedway Motorsports (SMC), two of the largest owners of stock-car racetracks, "are slowing down," causing fans on Wall Street "to start waving the caution flag about the two stocks," according to Tippett & Brooks of the WALL STREET JOURNAL FL edition. Shares of SMC and ISC reached highs of $31 and $25-a-share, respectively, but both have been "stuck in the slow lane lately." Tippett & Brooks added that it isn't so much that "growth hasn't materialized," but that "it doesn't seem to be coming fast enough to justify higher multiples." Gerard Klauer Mattison's Stuart Linde "fears" that ISC and SMC may build "Taj Mahal" tracks that will cost "at least" $100M apiece. He adds there "aren't enough big, high-attendance races to go around yet," and "recommends" purchasing smaller operators, like Dover Downs Ent., which are "likely to spend much less and generate higher returns on investment by acquiring existing tracks." In addition, some money managers feel the stock-car sector's appeal has "already faded." Wasatch Advisors Portfolio Manager Jeff Cardon said track operators can't grow fast enough to justify multiples approaching 30 times projected '97 earnings, and added that there is a "finite" market for NASCAR's "brand of racing" (WALL STREET JOURNAL, 9/17).