The Supreme Court paves the way for legalized sports betting across the United States, spreading an air of optimism not only for the gaming and casino stocks but also for specialized gambling-technology providers and racetrack operators.
This is especially true as the court has abandoned the two-decade old law -- Professional and Amateur Sports Protection Act (PASPA) -- that bars gambling on football, basketball, baseball and other sports basically everywhere in America other than Nevada in the gambling capital Las Vegas. The 6-3 decision ruled, "Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own."
The ruling came in a tough fight from New Jersey for years to legalize gambling on sports at casinos and racetracks in the state.
A Move to Cheer
The news ignited a rally in the gaming stocks, sending most of them to record highs. This is because the ruling will allow legal sports betting in numerous states that could generate hundreds of millions of dollars a year in new revenues. Additionally, it has explored opportunities to open up new sports betting businesses for Americans seeking to bet on sports in a safe and regulated manner. The American Gaming Association estimates that Americans illegally wager about $150 billion on sports each year through off-shore, black market bookies.
According to the study by the American Sports Betting Association, the move could add as much as $26 billion to U.S. gross domestic profit, create as many as 152,000 new jobs, and bring in between $4.8 billion and $5.3 billion in new revenues for the states.
Per the research firm Eilers & Krejcik Gaming, legal sports betting market may bring in $6.03 billion annually by 2023 while the analyst at Jefferies estimates the market for legal sports betting could be as big as $57 billion nationwide.
In particular, the legalization has set the stage for dramatic expansion of the gambling business in New Jersey. Gambling hubs such as Atlantic City and Monmouth Park racetrack are expected to be operational within the next few weeks. The state law at issue would allow people aged 21 and above to bet on sports at New Jersey casinos and racetracks but would ban wagers on college teams based in or playing in the state.
Seven states — Connecticut, Delaware, Pennsylvania, Iowa, New York, Mississippi and West Virginia — have already cleared the way for legal sports betting while 13 other states — California, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Minnesota, Michigan, Missouri, Oklahoma, Rhode Island and South Carolina — have plans or proposals to consider legalizing sports betting.
However, the move will break up Nevada's monopoly on the practice and could take some sheen away from the likes of Wynn Resorts (WYNN - Free Report) and Las Vegas Sands (LVS - Free Report) . Though it could put some pressure on Nevada’s gambling business, the move would not really hurt the overall casino business. Las Vegas has made great strides toward attracting visitors for more than just gambling, expanding its offerings of entertainment, dining and resort and spa services. Nevada casinos generated $26.2 billion in gambling revenue during 2017, surpassing a record set in the U.S. state prior to the recession in 2007 as per data from the Nevada Gaming Control Board.
How to Cash In?
That said, investors seeking to capitalize the boom in sports betting could make a play on any of the following stocks:
Penn National Gaming Inc. (PENN - Free Report)
Based in Wyomissing, PA, Penn National Gaming owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. The stock has gained 4.7% following the news. Analysts has been raising the earnings estimates for this stock with the 2018 Zacks Consensus Estimate moving up from $1.48 to $1.55. The stock has a top Zacks Rank #1 (Strong Buy) and a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Stars Group Inc. (TSG - Free Report)
Based in Toronto, Canada, The Stars Group provides technology-based products and services to gaming and interactive entertainment industries in Canada and internationally. It owns and operates gaming and related interactive entertainment businesses under the PokerStars, PokerStars Casino, BetStars, Full Tilt, the PokerStars Players No Limit Hold'em Championship, European Poker Tour, PokerStars Caribbean Adventure, Latin American Poker Tour, Asia Pacific Poker Tour, PokerStars Festival, and PokerStars MEGASTACK live poker tour and event brands. The company is expected to post earnings growth of 7.56% for this year and its shares rallied 9% on the news. The stock has a Zacks Rank #2 (Buy) and a VGM Score of B.
International Game Technology PLC (IGT - Free Report)
Based in London, the United Kingdom, International Game Technology operates and provides technology products and services across lotteries, electronic gaming machines, sports betting, and interactive gaming markets worldwide. The stock saw positive earnings estimate revision of a couple of cents over the past 30 days for this year and carries a Zacks Rank #2. It has a solid Value and Momentum Score of B each and was up 3.1% on the day.
Churchill Downs Incorporated (CHDN - Free Report)
Based in Louisville, Kentucky, Churchill Downs operates as a racing, gaming, and online entertainment company in the United States. The stock saw solid earnings estimate revision of 12 cents for this year over the past month with an expected growth rate of 81.97%. It surged 4.9% on the news and has a Zacks Rank #3 (Hold). It also has a solid Momentum Score of A.
Boyd Gaming Corporation (BYD - Free Report)
Based in Las Vegas, NV, Boyd Gaming Corporation is a leading diversified owner and operator of 22 gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi and New Jersey. The stock gained 3.1% on the day and has seen positive earnings estimate revision of five cents over the past 30 days for this year. The company’s earnings are expected to grow 26.21%. Boyd Gaming has a Zacks Rank #3 and a VGM Score of B.
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