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: Genius Sports (GENI) filed to sell 7.67M ordinary shares
Gan Limited (GAN) announced that it has accepted the resignation of Karen Flores from her position as CFO as well as from the company's board of directors, effective immediately. The company has appointed Brian Chang, senior VP, corporate controller, to assume the duties of CFO in the interim. The company's search process for its next CFO is underway.
BetMGM (MGM) launched its mobile app in Maryland giving customers access to a variety of online betting options and benefits tied to MGM Resorts' destinations nationwide, including MGM National Harbor. Caesars Entertainment (CZR) also announced its sports wagering mobile app, Caesars Sportsbook, is accepting sports bets in the Old Line State. Eligible sports fans can now enjoy an elevated mobile sports wagering experience on iOS, Android, or desktop while taking advantage of industry-leading rewards and special sign-up offers.
Elys Game Technology (ELYS) announced that the company was granted conditional approval for Type C sports gaming proprietor licensure from the Ohio Casino Control Commission for a period of five years effective January 1, 2023. The commencement of betting transactions in Ohio is subject to obtaining all further required certifications and licensing, and is conditioned upon the payment of license fees, ongoing proprietor suitability and continuous maintenance of compliance requirements of the OCCC for the duration of the license.
The National Football League and Genius Sports announced new licensing agreements with three sportsbooks to distribute live video streams of NFL matches to their customers in Canada. Bet365, Bet99 and Rivalry have all been granted the rights to provide their customers in Canada with low latency video streams of all regular and post-season matches on the NFL through Genius Sports' fully integrated Watch & Bet solution.
Some DraftKings (DKNG) users have reported having the money in their accounts cashed out without their authorization, Action Network's Darren Rovell reported earlier this week. In response, DraftKings said via Twitter that "We are aware of reports of customers having issues with their accounts, and we are investigating... If any customers are having issues with their accounts, please contact Customer Experience Team at support@draftkings.com." DraftKings then posted a statement by Paul Liberman, president, global technology and product and co-founder, who stated in part: "DraftKings is aware that some customers are experiencing irregular activity with their accounts. We currently believe that the login information of these customers was compromised on other websites and then used to access their DraftKings accounts where they used the same login information. We have seen no evidence that DraftKings' systems were breached to obtain this information. We have identified less than $300,000 of customer funds that were affected, and we intend to make whole any customer that was impacted." Susquehanna analyst Joseph Stauff said the report of DraftKings customers being victims of an alleged phishing hack will likely have the biggest impact on user trends and confidence, but said but this risk was almost "inevitable" considering the size of money flows in online gambling and called it a "cost of doing business" within the digital realm. Stauff is waiting for more details to emerge but he maintains his Positive rating and $19 price target on DraftKings shares.
China reported its first deaths from Covid-19 since May and announced new restrictions, The Wall Street Journal's Raffaele Huang reported. The three victims, all over 87 years old and with pre-existing illnesses, were from Beijing, where infections have more than doubled in the past four days, official data show. China reported around 26,000 locally transmitted new daily cases for Sunday, with cases also surging in other major cities, The WSJ said. The central government has said it has no intention of abandoning its "zero-Covid" policy, only telling local officials to be more precise in its application to minimize damage to the country's economy. Guangzhou plans to lock down for five days the district where China's third-largest airport is located after closing all entertainment venues and halted dine-in services in restaurants in the central business district over the weekend. Companies in the Macau gaming space that may be impacted by this news include Las Vegas Sands (LVS), Wynn Resorts (WYNN), MGM (MGM) and Melco Resorts (MLCO).
BAYOU STATE UPDATE: Louisiana’s first full year of legal sports betting resulted in more than $1.8B in wagers and over $26.4M in taxes for the state, the Greater baton Rouge Business Report wrote. Louisiana sports betting in October reached a record of $255.5M wagered, with $219M coming from mobile bets and $36.4M from retail sites. The wagers produced net proceeds of $4.2M for retail and nearly $26M for mobile, according to the Louisiana Gaming Control Board. “Sports betting continues to move along very well with no problems,” Ronnie Johns, Louisiana Gaming Control Board chair, said at the board’s monthly meeting last week. Louisiana legalized retail sports betting beginning in November 2021 and mobile sports betting shortly after in January. The legislation allowed mobile operators to utilize up to $5M in promotional credits, and most used up the allowance earlier in the year, thus increasing tax revenues over the last six months.
ANALYST COMMENTARY: Morgan Stanley analyst Stephen Grambling initiated U.S. Gaming with an In-Line view as depressed valuation has started to reflect earnings risk from an eroding macro. The analyst anticipates U.S. gross gaming revenue, or GGR, to contract in the year ahead as consumer spending slows and share of wallet for gambling reverts closer to historical levels. He concluded that while valuation is getting more attractive, it is too early to be constructive on the group with earnings revisions lurking. Grambling initiated coverage of several companies as he began his coverage of the U.S. gaming space. Sportradar (SRAD) was initiated with an Equal Weight rating and $12 price target. Penn Entertainment (PENN) was imitated with an Equal Weight rating and $36 price target. MGM Resorts was started with an Equal Weight rating and $39 price target. He kicked Caesars off with an Equal Weight rating and $51 price target. Wynn Resorts was initiated with an Equal Weight rating and $77 price target. Boyd Gaming (BYD) was started with an Underweight rating and $54 price target. Grambling started Las Vegas Sands with an Overweight rating and $49 price target. Finally, he assumed coverage of DraftKings with an Overweight rating and $20 price target, identifying it as his Top Pick among his U.S. Gaming coverage. Depressed valuations have started to reflect earnings risk from an eroding macro environment and he would watch for further EPS revisions to become constructive, said Grambling, who expects U.S. gross gaming revenue, or GGR, to contract in the year ahead as consumer spending slows and share of wallet for gambling reverts closer to historical levels.
The Macau gaming industry lost $1.5B in estimated free cash flow in Q3, according to Morgan Stanley analyst Praveen Choudhary. Industry EBITDA was $600M down 27% from last quarter. Industry net debt increased to $23.3B. Exhibit 9shows the net debt and As of end-3Q22, most operators have cash that can sustain them for less than 12 months under a zero revenue environment, Choudhary told investors in a research note. The analyst added that most operators will need mass revenue to recover to over 40-50% of pre-Covid levels to break even n free cash flow terms based on Q3 fixed operating expense run rates.
BofA analyst Shaun Kelley wrote that October digital GGR for reported states was $871M as iGaming set a new monthly record, but online sports betting GGR declined sequentially as hold rates reverted. According to Kelley, for reported states: iGaming GGR hit a new monthly high at $451M with same state year-over-year growth improving 22%. OSB GGR was $420M, down 8% from last month despite handle being up 23% month-over-month a
Deutsche Bank analyst Steven Pizzella lowered the firm's price target on Sportradar to $14 from $16 and maintained a Buy rating on the shares post the Q3 beat. Sportradar reported strong results, raised fiscal 20222 revenue guidance, and provided favorable call commentary, including the U.S. turning profitable sooner than expected, Pizzella 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 Entertainment (PENN), Rush Street Interactive (RSI) and Wynn Resorts (WYNN).
