A Sure Bet? Morgan Stanley Predicts $7 Billion Industry for Sports Gambling

Sports gambling could be big business. This weekend’s Super Bowl will be the most legally bet-upon Super Bowl in history: $6.8 billion on one game, Super Bowl LIV, between the Kansas City Chiefs and the San Francisco 49ers.

On the outside looking in will be Canadians salivating at the chance to bet the one single game, as opposed to government run lotteries that force you to combine the Super Bowl with a series of additional bets in order to win. 

New polling from Pollara out this week shows that 62% of Canadians support changing the law to let people wager on a single sporting event, like who will win Sunday’s Super Bowl. If you ask people aged 18-29, the number rises to 81%. 

But what if there was a way to make some money off those in the business of sports gambling?

MGM took in $114 million from sports betting in 2018 on the Vegas strip, driven by their “Bet On The Go” online sports betting app.

There is appetite in Canada and clearly the money is being wagered in record numbers south of the border, so where do the investment opportunities lie?

As Americans make the migration from their local bookies and offshore accounts, investment possibilities are to be found in both brick and mortar casino groups and in the brand-based technology that provides certain states with their wagering infrastructure.

With the recent changes to state gambling laws, some states require the casino itself to take wagers… meaning customers must be physically present. This gives regional casino operators an advantage to providing a healthy return on investment. 

MGM Resorts International (MGM) is the biggest land casino operator in the US with annual revenues of $4 billion in Las Vegas alone, and they are hungry to lay a much bigger sports betting footprint.

MGM took in $114 million from sports betting in 2018 on the Vegas strip, driven by their “Bet On The Go” online sports betting app. They also gained a massive advantage by signing deals with the NBA, NHL, and MLB to be their official partner.  It’s no surprise that MGM’s stock’s earnings are expected to rise by more than 24% in 2020.

Investment possibilities are to be found in both brick and mortar casino groups and in the brand-based technology that provides certain states with their wagering infrastructure.

Eldorado Resorts, Inc. (ERI) is aiming to wrap up its $17.3 billion purchase of Caesars Entertainment Corp. (CZR) in the first half of 2020 and took steps toward accomplishing that objective with a new batch of regulatory approvals this week. Early in 2019, Caesars signed a deal that lets it use NFL branding in its casinos; that deal could give the company an edge as the league loosens its stance on gambling. 

Eldorado already owns a 20% stake in the U.S. subsidiary of London bookmaker William Hill, which is recognized as one of the best retail sports books in the world.

With the big players already identified, it is likely worth mentioning the lesser known long shots in the field. Some of the companies that may see a big revenue boost aren’t exactly household names.

Boyd Gaming (BYD) is one of the largest casino operators in the US, with 29 gaming properties in ten states. Like MGM, Boyd is positioning itself to be a major player in the emerging sports gambling sector by announcing a 2018 strategic partnership with daily fantasy football giant FanDuel.

FanDuel now runs some of its sports books under the Boyd’s name. In exchange, Boyd can direct market to FanDuel’s database of over 10 million customers in hopes they will enter their casinos or their online platform. The agreement helped Boyd excel with revenue jumping to $3.3 billion in 2019, a 25% increase.

The other dark horse in the field is more commonly associated with actual horses. Churchill Downs (CHDN). The Kentucky Derby operator is a gaming behemoth with brick-and-mortar casino operations in seven states. Following a decision by the state of Illinois to legalize sports gambling and approve six new casinos, Churchill Downs saw its stocks gain momentum in 2019. 

Churchill Downs will also be a major player going forward due their continued investment in the BetAmerica online platform which rolled out to sports gamblers in multiple states thru 2019. 

Morgan Stanley predicts that the U.S. market will be able to generate nearly 7 billion in revenues by 2025, significantly up from $833 million in 2019. in short, the opportunities are out there for those who know the players and who want to be on the front end of a market that is set to score big.