Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Bally's (BALY) and Oscar de la Hoya's KO Entertainment, a subsidiary of Golden Boy Promotions, announced the formation of a strategic relationship that aims to incorporate innovation, objectivity and gamification into combat sports, in an effort to transform fan engagement. To unveil this initiative, the companies will broadcast a pilot of "Oscar de la Hoya's KO Entertainment Presents Bally's Fight Night," which they call "a reimagining of how the sports of boxing and mixed martial arts are presented, and the first development in the 2.0 gamification of combat sports."
Boyd Gaming (BYD) and Hawaiian Airlines (HA) have entered a strategic partnership to allow members to earn benefits and rewards with Boyd Gaming's B Connected player loyalty program and the carrier's HawaiianMiles program. The partnership provides customers with greater access to B Connected's selection of reward tiers, exclusive player benefits and memorable entertainment experiences, as well as more ways to earn and use HawaiianMiles, they said.
Earlier this week, Genius Sports (GENI) announced a 22M share secondary priced at $19.00. The deal size was increased to 22M shares from 20M shares. Goldman Sachs acted as sole book running manager for the offering. The stock sale announcement came after Needham analyst Bernie McTernan initiated coverage of Genius Sports with a Buy rating and $28 price target. The analyst said he is positive on the company's positioning in facilitating the transfer of high quality data from sports leagues to sports books as the value of this data rises amid proliferation of mobile and in-game betting. Genius Sports will be able to grow wallet share as the sports betting market grows globally and as the company rolls out additional products to sports books such as ad tech and streaming, he told investors.
The pandemic hit Las Vegas hard in March 2020, and while gambling is often resilient during economic downturns, it's hard to maintain business as usual when casinos are shut down for nearly three months, Lawrence Strauss wrote in this week's edition of Barron's. Now, lifted by a surge of leisure travelers, Las Vegas is shaking off the pandemic's grip and staging a comeback, the author noted, adding that MGM Resorts (MGM), which has the most hotel rooms on the Strip, set a monthly record in March with 1.3 million nights booked for this year and into 2022 on a gross basis. For MGM and its peers, there remain a number of hurdles to overcome, including a labor shortage and corporate restrictions on travel, the publication added. Meanwhile, JPMorgan analyst Joseph Greff raised the firm's price target on MGM Resorts to $52 from $47 and keeps an Overweight rating on the shares. The analyst continues to like the trajectory and operating momentum for Las Vegas Strip operators. He sees "multiple catalysts ahead" with positive trends resulting in Q2 earnings beats and second half estimates increasing into the football season. This should be a seasonally strong period for the U.S. sports betting operators across the board, Greff told investors in a research note.
ILLINOIS CLAIMS #2 DESPITE NATIONWIDE SPORTS BETTING SLUMP: Illinois became the nation's number two market despite suffering the steepest month-over-month decline in sports betting volume in the market's history, joining New Jersey as the only states with an April handle of more than $500M. The decline in wagering was in line with a typical seasonal slowdown in sports betting that affected nearly every U.S. market, and less than expected with the return of in-person registration on April 4, according to analysts from PlayIllinois. Betting at Illinois' retail and online sportsbooks fell 15.2% to $537.2M in April from the record $633.6M in March, according to official data released Wednesday. April's handle created $43.6M in adjusted gross revenue, down from $44.3M in March, contributing $6.5M in state taxes and $527,100 in local taxes. All but one U.S. market reported a month-over-month decline in April wagering. Of the 10 largest, Illinois' decline was shallower by percentage than all but New Jersey's down 13%, Tennessee's down 13.6% and Pennsylvania's down 14.4%. Nearly all of those declines can be explained by the expected seasonal drop in sports betting, which typically begins in April and continues until the football season. Fast forward to May and the Illinois Gaming Board (IGB) reported that gaming activity across the state was slightly lower than April's levels. The IGB reported May net terminal income, or NTI, of $228.8M, which compared to $0M in May of 2020 and $240.7M in April. Northland analyst Greg Gibas told investors in a research note that he believes April and May's performance is setting up for a strong Q2 for Accel Entertainment (ACEL), offering upside to his current revenue estimate. The analyst cites better weather and consumers feeling more comfortable visiting casinos again as possible catalysts for a better Q2. Also, current Q2 revenue estimates of $172.8M assumes ACEL captures about 25% of state-wide NTI market share. On the other hand, Matthew Waters of Legal Sports report suggested otherwise, saying it is possible the $537.2M bet in April will be the highest for Illinois until NFL betting resumes in September. Reportedly, summer is typically a slow period for U.S. sports betting with NBA and NHL playoffs wrapping up, leaving MLB as the only major sport in action.
ANALYST COMMENTARY: Wells Fargo analyst Steven Cahall upgraded Fox Corp. (FOXA) to Overweight from Equal Weight with a price target of $47, up from $42. Investments in Credible Labs, Fox Bet and Flutter Entertainment (PDYPY) are evidence that Fox may be focused on a pivot toward sports betting, Cahall told investors in a research note. This indicates potential share price accretion of 17%-34% over the next couple of years, says the analyst. Cahall believes value realization from Fox Bet and a FanDuel option arbitration win could bring 17% accretion while the "real opportunity" would be Fox and Flutter building a new company longer term by combining FanDuel U.S. and Fox's non-news network assets.
JPMorgan's Joseph Greff raised the firm's price target on Caesars (CZR) to $129 from $120 and maintained an Overweight rating on the shares. The analyst continues to like the trajectory and operating momentum for Las Vegas Strip operators. He sees "multiple catalysts ahead" with positive trends resulting in Q2 earnings beats and second half estimates increasing into the football season. This should be a seasonally strong period for the U.S. sports betting operators across the board, Greff told investors in a research note.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), Score Media (SCR) and Wynn Resorts (WYNN).
