Casino shares rally on sports betting decision

Google Store Decision a Major Boost for Sports Betting Stocks

Casino shares rally on sports betting decision

Sports gambling continues its rise in popularity and prominence as the world’s signature wagering event, the Super Bowl, counts down to its Sunday kickoff.

And sports-betting stocks are rewarding investors, no doubt helped by Google’s decision to allow them at its Google Play store.

DraftKings, Fan Duel, MGM and Penn National, leaders in sports-betting tech, all have seen a rise in their share prices since the Jan. 28 announcement, which revealed a March 1 start date for real-money gambling and daily fantasy apps to be downloaded in 19 countries, including the US.

Immediately following the announcement, DraftKings jumped as much as 7%, and Penn National as much as 4%.

And, in Canada, theScore rose around 7%.

“This is a significant development for all sports bettors on Android and unlocks a huge market for mobile-app only sportsbooks ours,” said Aubrey Levy, theScore’s vice president of marketing and content.

Despite their exclusion from the official Google store, Android users can still use many of those apps; it just requires an external download.

Operators are required to have a valid gambling license in their state or country, and must prevent under-age people from using the app.

Let’s take a look at a few of the primary beneficiaries from the Jan. 28 announcement, with an updated stock price from Thursday’s closing numbers.

DraftKings (DKNG on the NASDAQ Exchange)

Along with FanDuel, it’s probably the most recognizable sports-wagering entity in the country. The company said it is home to more than 5 million users on its daily fantasy sports (DFS) platform.

Where it was: The shares were right around $52 at the time of the Google announcement, which kicked the stock upward some 7%.

Where it is: DraftKings finished Thursday at $63.

The stock’s arc has been dramatic over the past year, having exploded since early February 2020, at which time it was trading at around $11.

DraftKings claims via its estimates to soon own more than 10% of the total addressable market for online sports betting and iGaming in the coming years, it reported a 98% year-over-year revenue increase in its most recent earnings report and and its cozy relationship with ESPN certainly won’t hurt.

Flutter (PDYPY on the NASDAQ)

As most of those invested in the sports betting landscape surely know, the platform gained its primary momentum with the 2018 striking down of the federal ban on sports betting outside of Nevada.

And, also that year, the Federal Trade Commission denied the DraftKings-FanDuel partnership.

Where it was: Flutter was at $93.91 the day before Google’s announcement.

Where it is: The stock saw a quick spike on Jan. 28 but has settled in at around $96 since then, closing on Thursday at $96.50.

Flutter announced in December it would increase ownership in FanDuel to 95% from less than 60%. The company, at that time, issued 11.7 million new shares, benefiting from its partnership with Fox Corporation.

At the time of the announcement, FanDuel CEO Matt King said, “Today’s news affirms FanDuel’s market-leading position in the U.S. and our meaningful growth trajectory.”

FanDuel reports it is projecting revenues about 50% higher than that of DraftKings.

Long before the FanDuel increase, PDYPY stock was on the rally. It is up nearly 63% since the beginning of 2020.

BetMGM (MGM on the New York Stock Exchange)

The timing of its app launch was not good. Last spring, at the onset of the global pandemic, MGM stock took a big hit.

But the rise in sports wagering has coincided nicely with the company’s efforts to regain lost footing.

Where it was: The shares were worth $28 on Jan. 27 prior to the announcement and saw a leap to $29.56 at the close of trading the next day.

Where it is: MGM stock closed at more than $32 on Thursday.

The company has joined the team-up-with-pro-teams movement and now is the official sportsbook for the NBA’s Philadelphia 76ers. The company’s Borgata Resorts Hotel Casino & Spa in Atlantic City is now the “Official Away Game Host” of the team.

According to Morningstar analyst Dan Wasiolek, MGM will increase its sports-betting haul to 4% of its total revenue by 2024 – that's expected to be approximately $6.2 billion.

Penn National Gaming (PENN on NASDAQ)

Penn is the nation's largest and most diversified regional gaming company, with 41 properties across 19 states.

Among the bigger reasons for the attraction here is Barstool Sports, the multimedia company run by David Portnoy.

Where it was: PENN had stepped back to $96.80 on Jan. 27 but blew past $110 the next day.

Where it is: The momentum in early February across the major markets included PENN, which closed on Thursday north of $118.

People who don’t know too much about stocks are well aware of Barstool, and that leads those directly to Penn, which partnered with Barstool Sports in Pennsylvania in February 2020. Barstool will exclusively promote Penn’s products, including Barstool Sportsbook mobile app, to its national audience.

Barstool has 66 million monthly users.


Casino shares rally on sports betting decision

Penn National Gaming Inc. has hired a veteran gambling industry lawyer to assume leadership of its in-house law department next year.

Harper Ko, chief legal officer and general counsel at slot machine maker Everi Holdings Inc., will succeed the retiring Carl Sottosanti as Penn’s top lawyer on Jan. 1. The Wyomissing, Pa.-based casino and racetrack operator announced Nov. 19.

Sottosanti didn’t respond to a request for comment about his decision to step down at Penn, which he joined as deputy general counsel in 2003 before being promoted to the company’s top legal role a decade later. He will retire as legal chief Dec. 31.

Earlier this year, Sottosanti was one of many law department leaders across America that had their compensation reduced as a result of the coronavirus pandemic.

The gaming industry, which saw many of its revenue-generating establishments shuttered due to Covid-19 lockdown orders in various states, was particularly hard hit when it came to remuneration reductions. But on Oct. 1, Penn disclosed that it had restored Sottosanti’s 20% pay cut and reversed reductions for other top executives, including a 25% salary slash for president and CEO Jay Snowden.

Those moves came shortly before gaming industry stocks Penn rallied this month after Louisiana, Maryland, and South Dakota passed initiatives legalizing sports wagers. On Thursday, Bally’s Corp. paid $125 million to acquire online sports betting platform Bet.Works Corp.

Betting Boom

Penn praised Sottosanti for his contributions over a 17-year period that saw the company expand from a relatively small gaming operator to a “country wide omnichannel provider of retail and interactive gaming, sports betting, and entertainment,” the company said in a statement announcing his retirement.

Penn is reportedly one of several potential bidders for a sports information business owned by Z Capital Group LLC that could fetch $350 million in a sale. In January, Penn paid $136 million in January for a 36% stake in Barstool Sports Inc.

That cash-and-stock deal gave Penn the exclusive right to use the Barstool brand for casino and sports betting products, while also helping Penn raise $850 million through a September share sale.

The Barstool purchase came a year after Penn received regulatory approval for its $2.8 billion acquisition of Las Vegas-based rival Pinnacle Entertainment Inc. Wachtell, Lipton, Rosen & Katz advised Penn on the Pinnacle and Barstool transactions.

Penn said that as its operations increased in size following those acquisitions and other deals, Sottosanti helped oversee the company’s focus on corporate governance and labor and employment matters.

“Carl has been known for his tireless work ethic, dogged determination, and fierce advocacy in support of our company’s interests,” said a statement from Snowden, who added that while Sottosanti is “leaving behind some big shoes to fill,” he’s confident Ko is up to the challenge.

Ko, who has spent the past three years at Everi, didn’t respond to a request for comment about her new role.

Penn said she brings with her two decades of corporate legal and regulatory compliance experience at several casino operators and gaming equipment suppliers, including Scientific Games Corp., Bally Technologies Inc., and WMS Gaming Inc.

Snowden said Ko’s “expertise regarding the industry’s complex regulatory and compliance requirements” will help Penn as it continues to “execute our growth strategies across our land-based, interactive, and sports betting platforms.”

Ko owns roughly $406,000 in Everi stock, according to Bloomberg data. Proxy filings by the Las Vegas-based company, which is currently embroiled in a patent dispute over casino ATMs with rival NRT Technology Corp., show it didn’t make Ko among its top-five compensated executives in 2019.

Sottosanti, however, received nearly $2.7 million in total compensation from Penn in 2019, per a proxy statement filed by the company for that fiscal year. Nearly $1.5 million of that pay package was in cash, with the remainder in stock.

Bloomberg data shows that Sottosanti owns more than $5.8 million in Penn stock. He unloaded more than $12 million in Penn stock in three separate sales between July and October, per securities filings.

A retirement agreement between Sottosanti and Penn disclosed in a Nov. 20 securities filing shows that he will remain in an advisory position through March 1, 2021, at which time he will officially separate from the company. Sottosanti will receive his $675,000 base salary through that time and be eligible for a one-time $400,000 transition award to be paid Jan. 1, the company said.

In February, Penn hired former Duane Morris partner Christopher Soriano to be its new compliance chief, a move followed in September by the company bringing on Morgan, Lewis & Bockius associate Kevin Dermody in Philadelphia as corporate counsel for mergers and acquisitions and securities.


Gaming Stocks Surge As US Sports Betting Ban Falls

Casino shares rally on sports betting decision

Monday was a good day for the gaming industry.

In a landmark moment for stakeholders, the US Supreme Court overturned a long-standing federal ban on state-based regulation of sports betting.

Individual states will now be allowed to decide for themselves whether or not to legalize the activity.

Prior to the decision, Nevada sports betting had what amounted to a legal monopoly on single-game wagering in the US.

It’ll take a while to process all of the implications, which reach into every corner of the industry. There was plenty of immediate impact, though. As usual, the financial markets were right on top of the news.

As the ruling was being trotted out to anxious reporters, stocks tied to gambling and sports betting began to surge. Reactions from investors provide some good insight into expectations across the industry.

UK bookmakers lead the push

The court decision came down at 3 p.m. in the UK, just 90 minutes before the London Stock Exchange closed for the day. Even on short notice, European gaming stocks posted some of the biggest gains in the industry.

As you’d expect, the big bookmakers were the biggest movers.

UK leaders William Hill and Paddy Power Betfair both closed the day with double-digit gains.

The surge is especially impressive for PPB, which has a market cap of close to $7 billion. Both outfits are already active in the US, and both have plans for more US-facing expansion.

PPB gave back some of that value on Tuesday, but news also came out that it was close to acquiring daily fantasy sports site FanDuel.

William Hill, most notably, operates more than 100 Nevada betting facilities. Its name is already hanging behind the sports bar at Monmouth Park racetrack in New Jersey, having rightly predicted their day would come.

CEO of the company that operates the track Dennis Drazin says his property will be ready to take bets within weeks, and investors seem to believe him on the topic of NJ sports betting.

The William Hill Race & Sports Bar will soon offer betting on both horses and humans.

Paddy Power Betfair also has a footprint in New Jersey, albeit a digital one.

Betfair Casino runs on the back of Game Account Network software, which has a convenient partnership with Parx Casino in Pennsylvania. Those two state markets should be among the first to go live, and the stock rally seems to reflect those ambitions.

It’ll be interesting to see if the home-court dominance of these two groups in the UK will foreshadow similar control in US markets.

And speaking of GAN…

A big day for software providers

Software companies, not surprisingly, showed some huge returns for the day, and the reaction to the Tuesday highs was mixed.

  • 888 Holdings PLC (888): +16.44
  • Game Account Network (GAN): +15.15
  • Scientific Games Corp. (SGMS): +11.15
  • The Stars Group (TSG): +9.13
  • GVC Holdings PLC (GBX): +7.24
  • International Game Technology PLC (IGT): +3.13

Hopeful for this sort of expansion, all of the major online gaming providers have cultivated relationships with US clients.

It’s almost futile to run through the list, which is both expansive and expanding quickly.

The partnerships span multiple jurisdictions, across both land-based gambling products and digital platforms for poker and casino.

At the moment, those partnerships are mostly focused on online casino games in limited markets, but the potential for sports betting drove the Monday rush. This group essentially represents the core that will drive online gambling technology forward in the US. Sports betting tech, too.

Regional casino stocks climb, too

Casino empires also saw their stocks rise nearly across the board on Monday.

  • Caesars Entertainment Corporation (CZR): +5.46
  • Churchill Downs, Inc. (CHDN): +4.87
  • Penn National Gaming, Inc. (PENN): +4.68
  • Boyd Gaming Corporation (BYD): +3.06
  • Eldorado Resorts (ERI): +2.37
  • Pinnacle Entertainment (PNK): +1.88
  • MGM Resorts International (MGM): +1.64
  • Gaming and Leisure Properties (GLPI): +0.32
  • Las Vegas Sands Corp. (LVS): -0.83
  • Wynn Resorts (WYNN): -2.05

The trend was particularly prevalent for regional groups with broad reach, Caesars. The Nevada-based giant has peppered the US map with its casinos, maintaining a presence in many states exploring sports betting.

Churchill Downs, Penn National, and Boyd Gaming all took up positions in PA during recent months, each acquiring a new property in the state. All three will ly move into sports betting. Expect CDI, in particular, to leverage its horse betting experience into a strong market share starting in PA.

Eldorado just sold off one of its two PA casinos, but that freed up room for a big acquisition of Tropicana Entertainment properties. The transaction expanded the group’s reach into the neighboring state, providing a home for a potential NJ sportsbook.

It’s also worth noting that Las Vegas Sands and Wynn Resorts own some of the only gaming stocks that dropped on Monday. Sands’ owner Sheldon Adelson is the leading voice against online gambling, and his group just sold off Sands Bethlehem and exited the PA market entirely.

There are other reasons for Wynn’s ongoing stock slide, and it doesn’t have a regional presence related to the SCOTUS ruling to mitigate those struggles.


The Rally In Penn National Stock Isn’t Over Yet

Casino shares rally on sports betting decision

Some investors might look past Penn National Gaming (NASDAQ:PENN) at this point. After a post-earnings pop Thursday, PENN stock now has rallied nearly 400% from March lows. Meanwhile, near-term pressure from the novel coronavirus on the gaming industry seems ly to be intense.

Source: Casimiro PT /

From a long-term perspective, however, I believe that would be a mistake. I’ve recommended Penn National since it traded below $10 at the beginning of last month. At $18, I still believe the stock is a winner.

After all, we’re seeing the country, thankfully, begin the process of returning to normalcy. At some point, that will include the casino business.

Meanwhile, Penn has a huge opportunity in sports betting and online gambling. And the same heavily leveraged balance sheet that helped drive a 90% decline in a matter of weeks in March can amplify upside going forward.

Certainly, to some extent, the easy money has been made. Penn National isn’t going to gain another 384% over the next seven-plus weeks. But there’s still a path for the stock to return to, and potentially beyond, highs near $40 reached early this year.

Put another way, PENN stock has more upside left.

Brick-and-Mortar Struggles

Unsurprisingly, brick-and-mortar casino operators have been absolutely hammered since the coronavirus began to spread.

Penn’s stock has nearly quintupled from the lows, but it is down 29% year-to-date and over 50% from its February highs.

Eldorado Resorts (NASDAQ:ERI) has fared far worse, losing two-thirds of its value in 2020.

Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN), which have substantial operations in the Chinese enclave of Macau, are off 32% and 43%, respectively.

The weakness makes some sense. There’s going to be a mid-term impact on the industry. Re-opening plans, for instance, include reduced seats at blackjack tables and fewer slot machines on the gaming floor.

Even with those restrictions, many customers won’t be comfortable setting foot in casinos for some time to come.

Balance sheets amplify that pressure. Penn National closed its first quarter with $2.17 billion in debt net of cash. It pays another $900 million annually in rent to real estate investment trusts, primarily Gaming & Leisure Properties (NASDAQ:GLPI). Penn spun off GLPI back in 2013.

Put another way, the 90% decline in PENN stock didn’t reflect the market’s opinion that the business was worth 90% less. Only the equity. With over $2 billion in net debt, and lease commitments of nearly $9 billion on the balance sheet, the loss of about $2.5 billion in market capitalization from the highs perhaps makes some sense.

Sports Betting and iGaming

But Penn isn’t just a brick-and-mortar operator anymore. The company is building out its online gambling capabilities in Pennsylvania. Per this week’s first-quarter release, the company has added 40,000 customers in that state with reasonably modest marketing spend.

And, of course, earlier this year Penn acquired a 36% stake in Barstool Sports. PENN stock soared on that news, as it gave the company a hugely popular brand for its sports betting operations.

Investors are enormously optimistic about those businesses at the moment. DraftKings (NASDAQ:DKNG) has more than doubled so far this year. It has a market capitalization nearing $9 billion.

GAN Ltd (NASDAQ:GAN) just listed in the U.S. — and the stock has rallied to $13.50 from an initial public offering price of $8.50. Meanwhile, Flutter Entertainment (OTCMKTS:PDYPY), which owns FanDuel, now is roughly flat year to date.

The market is seeing U.S. sports betting, in particular, as a huge opportunity. And legalization may expand more quickly as state governments look to raise revenue. Certainly, in other stocks, investors are buying that thesis. They will ly do the same with PENN stock as well.

Muddling Through

There are risks. But the fear in March that Penn wouldn’t make it through this crisis now seems unfounded.

Penn said in the Q1 release that it finished March with $731 million in cash. The average cash burn rate with casinos closed is about $83 million per month.

Penn can get to the end of the year even with casinos closed, but some are preparing to reopen. Meanwhile, GLPI is incentivized to keep Penn afloat. Its chief executive officer, Peter Carlino, is part of the family that founded Penn National. Carlino and family trusts still own 4.5% of PENN stock.

GLPI already made a deal with Penn to acquire the Tropicana Las Vegas. If need be, it can make more deals to provide cash to Penn or allow the operator to defer rent. The balance sheet is heavy, but fears of near-term bankruptcy fortunately seem minimal.

The Long-Term Case for PENN Stock

That leaves a solid long-term case. Penn has real drivers in iGaming and sports betting. Brick-and-mortar operations will return to normalcy at some point. The combination suggests at some point that Penn’s stock can retake its February highs.

With the stock at $18, that still suggests significant upside. Even if it takes a full five years, PENN stock would return about 17% a year. That’s a solid return. If the company is a big winner in sports betting, the returns can be even bigger.

The balance sheet that pressured the stock on the way down can amplify the gains on the way back up. Indeed, it has done so already. And while the absolute amount of debt and leases is a concern, Penn has plenty of flexibility.

The country is going to get back to normal. So will Penn. And as that happens, the bull case that investors loved in February will come back. Over time, the same will be true for the price of Penn’s stock.

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4 Gambling Stocks Set for a Bull Run in 2021

Casino shares rally on sports betting decision

If someone could bet a large sum of money in late 2019 that the novel coronavirus alter global conditions would change so dramatically, the return would have been astronomical. And while there are ways to bet on unusual things with little odds of profiting, the gambling stocks below offer high odds of performing well in 2021.

A ReportLinker report on the global gambling industry predicts growth:

  • Global gambling market to reach $647.9 billion by 2027 even accounting for the pandemic.

  • Lotteries are projected to post a 9.9% compound annual growth rate and total $209.9 billion by 2027.

  • The casino segment’s CAGR, citing the pandemic, was revised to 2%.

The gambling resorts that follow attract thousands of visitors each year. Traveling is expected to rebound – entertainment too. And, the stakes are high that adding quality gambling stocks to your portfolio could mean a nice bull run in 2021.

InvestorPlace – Stock Market News, Stock Advice & Trading Tips

  • Grading 10 of 2020’s Hottest SPACs in Preparation for the New Year

With economic recovery and an increase in consumer spending, these exchange-traded funds and companies could perform well next year:

  • Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ)

  • VanEck Vectors Gaming ETF (NASDAQ:BJK)

  • MGM Resorts International (NYSE:MGM)

  • Las Vegas Sands (NYSE:LVS)

Gambling Stocks: Roundhill Sports Betting & iGaming ETF (BETZ)

A man looking at a computer with poker chips on the screen.

Source: rawf8/

This sports betting ETF includes gambling stocks focused on the sports betting & iGaming industries. But the good news is that it has a global view and not just U.S. stocks.

As of late December 2020, the assets under management were $204 million and the expense ratio was 0.75%. This ratio is considered neither too high, nor too low.

This is a balanced ETF with 38 holdings, including Penn National Gaming (NASDAQ:PENN) and DraftKings (NASDAQ:DKNG).

While the U.S. is the largest country with net assets exposure, this fund offers plenty of diversification with the rest assets targeting Europe and Asia. There is a preference for mid-cap stocks, which represent 51.4% of the net assets. Assets are rebalanced quarterly.

The net asset value increased by 39% since its inception in June 2020.

VanEck Vectors Gaming ETF (BJK)

a room of slot machines in a casino to represent gambling stocks

Source: Shutterstock

According to the fund description, this gambling ETF “seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Gaming Index, which is intended to track the overall performance of companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology, and gaming equipment.”

As of late December 2020, the total net assets were $75.7 million, and the net expenses ratio was 0.66%. This ETF can add diversification investing in gambling stocks with 42 holdings. The U.S.

is the country with the largest weighting at 46.92%. Other countries represented include Australia and China. With a year-to-date performance of net asset value of 11.

59%, the overall performance is considered attractive.

  • Grading 10 of 2020’s Hottest SPACs in Preparation for the New Year

Both of these ETFs offer the benefit of investing in gambling stocks without focusing directly on stock analysis, suitable for passive investing. For investors with a more active style of investing, the following gambling stocks offer attractive risk-reward potential in 2021.

Gambling Stocks: MGM Resorts International (MGM)

A photo of the MGM logo on the MGM casino building.

Source: Michael Neil Thomas /

MGM Resorts International has casino resorts in the United States and Macau offering a variety of gaming, hotel, and entertainment amenities. It was cited in another InvestorPlace article: 3 Hotel Stocks That Are the Biggest Threats to Airbnb.

Looking at its year-to-date performance of -5.95% seems to be an underperforming stock. But the stock has an impressive rally of about +44% in the past three months. It seems cheap too, with a P/E Ratio (TTM) of 10.62.

There are two positive factors that can drive growth for MGM stock. MGM became the sports betting partner of the Philadelphia 76ers NBA team. Also, sports betting ly will be a major growth driver for the industry in several states.

The company rebound seems in progress. The net margin of the stock was 15.86% in 2019 and in 2020, for the trailing 12 months, reached 21.47% amid the pandemic.

Las Vegas Sands (LVS)

a red sign with the Las Vegas Sands logo

Source: Andy Borysowski /

Las Vegas Sands operates resorts in Asia and the United States with gaming and entertainment amenities. The pandemic distorted its financial performance significantly in 2020.

Revenue, operating income and profitability declined and the company witnessed losses. From a valuation perspective, the stock seems expensive now, but this is due to the abnormal economy.

  • Grading 10 of 2020’s Hottest SPACs in Preparation for the New Year

I am optimistic that in 2021 LVS stock – down almost 15% in 2020 – could rebound and perform well.

Why? If we consider the year 2020 as an outlier to the stock’s performance, its trend in other years was consistent. This applies to profitability, revenue growth, and even to the dividend yield.

All were notable. And this consistent financial performance may well return as the odds are rather high.

On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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