Which Stocks and Companies Profit From Legalized Sports Betting?
A ruling from the U.S. Supreme Court could open the door to legal sports betting throughout the country, potentially generating billions of dollars in new revenues for local and state governments and many companies.
Under the ruling handed down on May 14, 2018, states are now free to pass their own laws regarding sports betting, and some states including New Jersey and Delaware are quickly moving to allow sportsbooks at existing casinos and other sites.
This is a big deal. In 2017, gamblers wagered $4.87 billion on sports in Nevada, where such bets were already legal. That represents nearly a quarter of a billion dollars in revenue. Thus, we can expect billions of dollars in additional revenue if sports wagering is legalized across the country.
Companies and Stocks That Will Profit From Legalized Gambling
What companies are poised to cash in on the potential explosion of people betting on games? And how might investors profit from this? Let’s take a look at the U.S.-based companies whose stocks are poised to benefit most from legalized sports betting:
MGM Resorts International [NYSE: MGM]
MGM already has a big presence in Las Vegas, where sports betting was already allowed. But in recent years, it has also opened casinos in New Jersey, Maryland, Detroit, and Mississippi, with another planned for Massachusetts. MGM has the infrastructure in place to roll out sports betting operations quickly. And if local governments choose to issue licenses for sports betting operations, it’s safe to assume they’ll favor established companies with a known track record.
Wynn Resorts [NASDAQ: WYNN]
Wynn has had a challenging stretch after its founder, Steve Wynn, resigned amid allegations of sexual misconduct. But this is still a sound company that has also made strides to operate outside of its home base of Las Vegas. Wynn has plans to open a new $2.4 billion casino resort in Massachusetts next year, so one can assume the company would benefit if the state legalizes sports betting there.
It’s also notable that Wynn has a sports betting app, Wynn Mobile Sports, that is currently only available to betters in Nevada. If sports gambling becomes legal in states across the country, you can expect Wynn to be at the forefront of mobile sports betting.
International Game Technology [NYSE: IGT]
Sports betting operations need a technology partner, and IGT is uniquely positioned to be a leader in this space. This is the world’s largest maker of slot machines, so it already has strong relationships with most major casino operators. It’s safe to assume they’ll look to get in on the sports betting phenomenon, too.
It already works with MGM on its sports betting operation in Las Vegas, and the company appears to have an inside track to be the technology partner for a sports betting effort in partnership with the Rhode Island Lottery. Bank of America/Merrill Lynch analysts said game technology companies like IGT could see a boost of as much as $1 billion in annual sales from legal sports gambling.
Boyd Gaming [NYSE: BYD]
Boyd is another sizable casino operator that already has a presence in Nevada and six midwestern and southern states. After the Supreme Court ruling, one Bank of America/Merrill Lynch analyst upgraded the company from “neutral” to “buy” and raised its share price target. With record revenues of $2.38 billion in 2017, Boyd has the resources to move quickly into sports gaming once it becomes widely legal.
Caesar’s [NYSE: CZR]
The Supreme Court’s ruling on sports betting may be the shot in the arm that Caesar’s needs after emerging from bankruptcy in 2017. Caesar’s CEO Mark Frissora said legalized sports wagering presented a “golden opportunity.” He also expects that Caesar's will become a big player once the legislative and regulatory environment clears. He said Caesar’s will expand its sports betting operations “wherever secure and responsible wagering on sporting events is legalized.”
Caesar’s is already one of the most well-known casino companies in the world, operating Caesar’s Palace and other resorts in Las Vegas, plus facilities in Mississippi, Maryland, California, New Jersey, and elsewhere.
Churchill Downs [NASDAQ: CHDN]
This company is more than just the Kentucky Derby. It owns casinos and racetracks in Mississippi, Maine, Pennsylvania, and many other locales. Churchill Downs also operates Twinspires.com, an online betting platform for horse racing, suggesting that it could quickly move into more extensive online sports betting when the time comes. While not as large as some players in the industry, the company did see revenue of $178 million in 2017, representing growth of 11 percent for the year.
Las Vegas Sands [NYSE: LVS]
With revenues of more than $12 billion in 2017, you can bet on CEO Sheldon Adelson to get in on the sports action. While a lot of the company’s expansion has been overseas, it did open a casino in Bethlehem, Pennsylvania, in 2009. This is the largest and most well-capitalized gambling company in the U.S., so if sports betting represents a new revenue opportunity, expect Sands to go after it.