On Monday, the Supreme Court overturned a 1992 federal law that essentially banned sports betting in most states. With roughly $150 billion in illegal wagers now being freed up in the market, gaming stocks could see huge returns and put up impressive numbers for investors. Here is everything you need to know to get ahead of this trend.
Where to Invest?
The entire sports gambling industry has room to profit from this new law, and most likely almost every gaming company will see an uptake in bets and profits. That being said, investors are looking to maximize their returns both in the short and long run. Analysts from Morgan Stanley have highlight one possible option, saying the ruling is “a slight positive for regional gaming stocks.”
Of these companies, Boyd Gaming (BYD - Free Report) and Penn National (PENN - Free Report) are two multi-state gaming companies that seem to be in line to profit the most, and for the longest duration of time, according to the investment bank. Penn National is currently sitting at a Zacks Rank #1 (Strong Buy), compared to a Zacks Rank #3 (Hold) for Boyd Gaming.
The Supreme Court decision came out yesterday, most likely not providing enough time for analysts to adjust earnings estimates. That being said, Penn National came into the legislation already at a strong buy, and with a nearly-guaranteed increase from legal gambling, the company is positioned very well relative to the market. In the past day and a half, Penn National stock has risen 5.4%, showing positive investor reaction to the new legislation.
But although investor sentiment is pushing the stock in the right direction now, outside competition could shake up the entire industry.
Joe Asher, CEO of the U.S. branch of William Hill , a British gaming company, has talked about a potential expansion into the US, one that could take as short as a few weeks. Other international companies will most likely follow suit as well, introducing both foreign competition and opportunity.
Asher does argue that “[betting] for a small segment of the population, it becomes an issue…the point is, I think, that’s much more likely to happen in the legal regulated market than it would ever happen in the black markets.”
This negative ideology against legalized gambling, especially if the government does not act on it, could hurt the stock if individuals feel that it is hurting individual’s lives. The CEO calls for responsible and active regulation by the government and companies.
Still, companies like William Hill can, and likely will, enter new legal markets in a matter of no time. This creates opportunities for investors to target companies with experience in legal countries like the U.K.
The new Supreme Court ruling allowing sports betting in the U.S. is a game changer for the industry.
Regional gaming companies such as Penn National and Boyd Gaming are poised to make large gains within the sector, although across the board relative gains will most likely be made throughout. Internationally, large gaming companies such as William Hill plan to make moves in the US market as well.
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