Ushering in good news for casino operators in the United States, the Supreme Court has overturned the Professional and Amateur Sports Protection Act (PASPA) that banned sports betting outside Nevada. The court supported the legality of a 2014 New Jersey law, which allows sports betting at casinos as well as racetracks in the state.
Following this latest verdict, New Jersey will not only legalize and control sports betting but will also collect tax revenues. The decision also broke the Nevada's monopoly on the betting market.
Furthermore, the Court ruling has opened the door for other states to enter sports betting business. Per Eilers & Krejcik Gaming 2017 reports, legal sports betting market is likely to garner $6.03 billion in revenues annually by 2023. In fact, in a bid to legalize sports betting, nearly 20 states have introduced bills and many other states have started working on this matter.
We believe that the scope for the casino operators will intensify if the betting gets legalized in other states as the illegal betting in the United States is valued at billions of dollars annually.
Top Gainers From Court Ruling
Penn National Gaming, Inc. (PENN - Free Report) , which own and manages gaming as well as racing facilities, and operates video gaming terminals, gained 4.7% following the Supreme Court verdict on May 14. In the past year, the stock has rallied 72.7%. We believe this Zacks Rank #1 (Strong Buy) company that operates in jurisdictions like California, Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Mississippi, Missouri, New Jersey, Ohio, Pennsylvania, Texas, West Virginia and other states to gain the most owing to this ruling. The inclusion of sports betting might further solidify its position in the gaming industry. The company has also expanded into online social gaming. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Caesars Entertainment Corporation (CZR - Free Report) also gained 5.5%. Also, it was the top gainer among the other companies from the gaming industry. Although based in Las Vegas, Caesars Entertainment operates all over the United States. Investors are optimistic that the addition of sports betting to its existing operations might drive the company’s long-term growth.
MGM Resorts International’s (MGM - Free Report) stock gained nearly 2%, following the court ruling. The company, which operates in the United States and China, said that “We have already established the architecture to deploy sports betting as soon as the states allow us to do that.” This apart, the company has its own mobile app called PlayMGM, which is active in Nevada. Per MGM Resorts, legalization of sports betting will result in “hundreds of millions of dollars in profit to the company.”
International Game Technology (IGT - Free Report) , which designs, develops, manufactures and markets casino-style gaming equipment, systems technology, and game content, gained 3.1%. This Zacks Rank #2 (Buy) company’s top line is likely to witness a sharp gain backed by increase in demand for gaming equipment.
Rally to Continue
In a year’s time, the gaming industry has rallied 21.1%, outpacing the S&P 500’s gain of 13.6%. This bullish trend in gambling industry is expected to continue through 2018 and beyond. According to Research and Markets, the global casino gaming market is anticipated to witness a CAGR of 10.16% in the 2017-2021 period. The stellar rally of casino stocks on the bourses has been supported by strength in domestic market, turnaround in Macau business and overall international interest in gaming space.
Furthermore, lenient government regulations with respect to online casinos have led to a rapid rise in casino operators. Notably, online gambling has been a primary growth driver for the market as a wide range of customers has gained access to such portals. In fact, the scope for the gambling industry has widened, courtesy of legalized online gambling in more than 80 countries. Europe is considered the world’s largest online gambling market.
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