Like the Internet boom of the late 1990s, Wall Street’s latest craze – poker-mania – is bound to have its casualties. They’re an inevitable outgrowth of every craze. Or as any poker player will tell you, what looks like a surefire winning hand is often a losing hand.

That may well be the case, some pros suggest, with America’s two purest poker stock plays – WPT Enterprises, ($18.44), the Hollywood, Calif., creator of the widely watched World Poker Tour telecast on the Travel Channel, and Lakes Entertainment ($17.50), a Minnetonka, Minn. gambling-related company that owns 64% of WPT.

Poker, as we all know, is booming, thanks to an explosion in online poker – a $2 billion annual business – a slew of TV shows featuring celebrities and everyday Joes in pursuit of lofty prizes that run into the multimillions, and a swelling American poker population, estimated by Gaming Today, a Las Vegas paper covering the gaming industry, at about 50 million (both online and at home).

Still, investors, it’s thought, should be somewhat skeptical, if not downright leery, of both WPT and Lakes in light of the following:

* Extremely touty Wall Street stock price targets, which run as high as $100 on the shares of WPT, as well as equally touty Street earnings estimates, some of which run 50 cents a share this year, $1 in 2006, and close to $2 in 2007. These kind of flamboyant forecasts are usually flashing red lights for any thinking investor, especially when you consider WPT lost money in its latest quarter.

One money manager who spoke to WPT’s chief financial officer, Todd Steele, told me he was “bowled over” by nonstop blue-sky talk that virtually ruled out any kind of problems and that gave his blessings to giant earnings numbers. “I wouldn’t touch the stock after that,” the money manager said. Mr. Steele declined to respond to several calls seeking comment.

* A battle between the Securities and Exchange Commission and Lakes Entertainment, which delayed its 2004 annual report after regulators questioned its accounting of development costs and advances related to Indian casinos in its 2003 financial statement. Lakes, in turn, claims its accounting complies with regulatory guidelines.

* Lyle Berman, chairman and CEO of both WPT and Lakes, is viewed by a number of gaming experts as highly stock promotional. Repeated efforts to reach Mr. Berman were unproductive.

* A recent flurry of insider selling of more than one million WPT shares, as well as insider sales of Lakes shares, hardly a vote of confidence for an exploding industry.

* The prospects of ballooning competition in poker-related businesses.

“Poker has enormous potential; it’s not going to flame out and become a hoola hoop,” observes David Ehlers, chairman of Las Vegas Investment Advisors, who nevertheless tells me he wouldn’t buy either WPT or Lakes. “Too speculative and there’s nothing in terms of real earnings to merit the stock price,” he said. He also cites what he regards as another big risk – “a lot of wannabees,” namely, lots of other companies that want to get into the act.

The threat of stiffer competition is also cited by a number of short sellers (those pros who bet stock prices will fall). They note, for example, the rivalry from Harrah’s Entertainment, the world’s largest gaming company. Harrah’s sponsors the World Series of Poker – the biggest event in poker – which airs on Disney’s ESPN channel. Likewise, other networks are said to be eager to bring poker to network TV.

Though not in writing, that touty $100 price tag on WPT, according to one money management source, came from Birmingham, Ala. brokerage Sterne, Agee & Leech, one of the rare firms tracking the company. “If you have some patience, you’re looking at a $100 number,” the money manager said he was told by a contact there. Nick Danna, the analyst who covers WPT for the brokerage, declined to respond to several phone calls. One of his associates, Aimee Kelly, explained the firm’s compliance department would not permit the analyst to respond.

In a recent memo, Sterne, Agee, following WPT’s disclosure of its fourth quarter results, urged clients to read past the headline, notably a loss for the period of 2 cents a share. In brief, it noted that the company would have actually reported an operating net of 5 cents a share if it hadn’t been for $656,000 in non-cash compensation charges and $700,000 in production costs for the Professional Poker Tour. It also took note of a revenue jump from $379,000 in the fourth quarter of 2003 to $5.7 million in last year’s fourth quarter. WPT’s total 2004 revenues were $17,560,000; earnings, 4 cents a share.

In conclusion, Sterne, Agee observed that “given the resurgence of poker, the well known World Poker Tour brand and the economics of licensing agreements, we reiterate our buy rating.”

It sounds impressive, but not to skeptical short sellers, who have taken sizable short stakes in both WPT (1.8 million shares) and Lakes Entertainment (2.5 million shares).These stakes represent about 10% of the shares of both companies. Two short sellers I spoke to raised questions about what they view as an ultra-promotional management, investors’ unrealistic blue-sky earnings expectations, increasing competition, and Mr. Berman’s run-in with the SEC.

What do WPT and Lakes Entertainment have to say? Alas, nothing. Though some Wall Street bulls on WPT claim to have immediate access to its top management anytime they want it, several nervous public relations staffers declined to respond to requests for interviews and information. “We want to know where you’re coming from,” a defensive spokesman, Gus Okwu, told me.

Needless to say, where there are bears, there are also bulls. WPT, which was formed in late 2002 and went public in August of 2004 at $8 a share, also has its boosters. One, a money manager who personally owns WPT shares, notes that the World Poker Tour is now broadcast in 60 countries, which he believes will drive traffic to the company’s new gambling Web site, Worldpokertour.com, which will launch in about a month. As another catalyst, he points to the prospects of a network affiliation for WPT, whose 2005 earnings he pegs at 40 cents a share.

Asked about considerable skepticism surrounding WPT, including its astronomical 461 p/e multiple, the money manager responded, “Every time someone knocks the company, all the stock does is go higher.”

Meanwhile, the publicly owned poker field will get more crowded this year, what with PartyGaming.Com., the owner of PartyPoker.com, the world’s largest poker room, planning an initial public offering in London that would value it at between $5.7 billion and $9.6 billion. Some pros say this one could be a royal flush. So as usual, the house wins again.