Sports betting could become a hot ticket item for the stock market players By Howard Stutz, Executive Editor, CDC Gaming Reports June 13, 2020 at 4:00 am With casinos reopening across the U.S. in the COVID-19 environment, legal sports betting is drawing renewed attention as the gaming industry recovers from its nationwide shutdown. The interest, however, comes from a different type of wagering. Gaming analysts and investors are beginning to view the sports betting universe beyond point spreads and future lines. Analysts see sports betting as potentially the next component within the publicly traded gaming sector, joining casinos, gaming equipment and technology providers, and gaming-centric real estate investment trusts. Eyebrows were raised after sports betting and daily fantasy website DraftKings jumped more than 10% on the Nasdaq during its first day as a public company back in April. At the time, with casinos closed and professional sports quieted, the hottest mobile sports wagering activity was soccer from Belarus. “We note many publicly traded online sports betting operators continue to outperform (projections) despite most major sporting events being on hold,” SunTrust Robinson gaming analyst Barry Jonas said in a research note last week. He cited DraftKings, which closed Friday at $36.88, up more than 41% in the past six weeks, and GAN, a London-based gaming software company, which raised $62.4 million in its initial public offering on the Nasdaq in May. Two casino operators with ties to sports betting – Eldorado Resorts and Penn National Gaming – are also gaining investor interest. Eldorado’s partnership with William Hill US, the American subsidiary of UK-based sports betting giant William Hill, gave the company a 20% ownership stake in the betting operation in exchange for a 25-year deal to manage sports wagering at its casinos. The deal becomes more lucrative once Eldorado’s $17.3 billion acquisition of Caesars Entertainment is completed. Under the terms of the deal, William Hill US will operate Caesars’ various sportsbooks, including at Caesars Palace and the company’s regional properties. Photo by John Locher/AP/Shutterstock Prop bets for Super Bowl LIII are on display before the start of the game at the Westgate Superbook sports book in Las Vegas. Penn National spent $163 million to acquire a 36% ownership stake in sports media platform Barstool Sports, which includes Barstool-branded retail sportsbooks in Penn’s regional casinos and a mobile sports wagering app and online casino site that are expected to launch in the fall. News website Axios noted that Penn, which fell as low $3.75 in midst of the coronavirus-fueled stock market meltdown at the end of March, was up almost 130% since early April. The company’s shares closed Friday at $29.65. “This surge signals a wider truth about the sports betting industry — it is uniquely suited to emerge from the pandemic virtually unaltered,” the Axios authors wrote. Jonas believes International Game Technology and Scientific Games, both of which provide sports wagering management systems to sportsbook operators and casinos, could see some value by spinning off those businesses. Scientific Games, for example, turned its social gaming division, SciPlay, into a separate public company last year, retaining a majority ownership stake. “The sports betting platform business potentially faces commoditization over time,” Jonas wrote. “However, we believe Scientific Games has deliberately taken the time to refine their offering and is well-positioned to win new (and) competitive contracts, given a comprehensive product suite and extensive background in Europe.” Coronavirus silenced the professional sports leagues in mid-March along with the casinos. Now, as gaming returns – the American Gaming Association has said that almost 63% of the commercial and tribal casino industry is currently back in business – sports seem to be fueling its own comeback. The NBA and NHL are looking to resume their seasons toward the end of summer, and Major League Baseball could come back in late July. The NFL has yet to pump the brakes on its upcoming season. Even if games are played without fans in attendance, sportsbooks will still prosper. For example, Las Vegas sportsbook operators said they took in a six-figure betting handle in May on the made-for-television golf match that pitted Tiger Woods and Peyton Manning against Phil Mickelson and Tom Brady. In 2019 – the first full-year of regulated sports betting after the U.S. Supreme Court’s landmark ruling legalizing the activity in May 2018 – Americans wagered more than $13 billion on sports, nearly double the $6.6 billion wagered in 2018. Sportsbooks were headed toward crushing that figure in 2020 based on the January and February numbers. When the NCAA’s March Madness basketball tournament was canceled, the year went south. There are now 18 states with legal sports betting operations. Four states – Tennessee, North Carolina, Virginia, Washington – have approved sports betting laws and could launch later this year. Meanwhile, legislation for legal sports betting is being considered in some form in another 20 states, including California, Ohio, and Louisiana. Legal Sports Report has estimated 75% of all U.S. states either have or are considering adding sports betting. “We think sports betting should continue to garner attention, with sports increasingly back online and state legislative efforts potentially accelerated,” Jonas said. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.