Betting on one’s favorite sports team just got a whole lot easier with the Supreme Court’s ruling against federal prohibitions on states that allow gambling on sporting events. While good news for wagering types, that decision will help lift the stocks of several gambling companies, especially established U.K.-based firms with considerable U.S. operations, like William Hill (WMH.UK), GVC Holdings (GVC.UK) and 888 Holdings (888.UK). But U.S. firms Boyd Gaming Corp. (BYD) and Penn National Gaming Inc. (PENN) will also be big beneficiaries “given their smaller market caps and exposure to numerous states,” according to Morgan Stanley equity analyst Thomas Allen, as reported by Barron’s.
With estimates of the annual size of the U.S. gambling market ranging from $100 billion to $400 billion, the three U.K. gambling firms saw their share prices jump on the Supreme Court’s ruling, which took place just over two weeks ago. William Hill rose more than 10%, GVC by 7%, and 888 by as much as 16%. The U.S.-based firms were also up, but the rise was not as dramatic. (To read more, see: 3 Casino Plays Primed for Sports Betting Profits.)
The U.K.’s Strong U.S. Presence
William Hill is already well positioned, running more than half of the 192 sports books in Nevada, and is the acting risk manager of sports betting for the Delaware lottery. Berenberg analyst Roberta Ciaccia thinks the company will be able to grab 10% of the U.S. sports-betting market by 2023, according to Barron’s.
She also believes that the 7% jump by GVC following the ruling priced in only about 40% of the upside to the company’s stock. The company is one of the leading providers of sports-book technology in Nevada, and its technology is also used to support MGM online casino and poker offerings in New Jersey.
Gibraltar-based 888, which is known for its online gambling site 888sport.com, also has significant operations in Nevada, Delaware and New Jersey, all three of which have previously legalized online gaming. JPMorgan analyst Doriana Russo thinks the company is “well positioned to take advantage of this new opportunity,” according to the Barron’s article published on May 18.
Top U.S. Picks
As mentioned above, U.S. gambling firms, Boyd and Penn, were given the thumbs up in Barron’s May 19 article. Morgan Stanley’s analyst estimates that sports betting will represent about $2 billion of the $120 billion U.S. gaming revenue, and that if both Boyd and Penn can nab a 10% market share, they should be able to bring in between $1.50 per share and $1.90 per share of added value, according to CNBC. (To read more, see: 3 Gambling Stocks That Will Beat The House: Morgan Stanley.)
Although not formally a gaming stock, Activision Blizzard Inc. (ATVI), the developer and owner of the video game known as Overwatch, is also expected to benefit from the new ruling. As Blizzard is expected to introduce a gambling component to the Overwatch League, a professional eSports league for Overwatch, Morgan Stanley’s Brian Nowack thinks that given a bull scenario where 30% of viewers wager $37 annually, Blizzard could bring in $13 million in 2020.