Sports Gambling: Just a Tiny Piece of the Pie

by Kyle Woodley | April 5, 2012 9:39 am

Right now, the U.S. is nearing the end of the seasonal sweet spot of big-event sports gambling — the Super Bowl and Final Four have passed, and the Masters is upon us. And apparently Tiger Woods’ resurgence has made the Masters a bigger sports book trophy than usual, fueling what’s widely expected to be record gambling on golf’s greatest event[1].

While investor have a number of reasons to get excited about gaming and casino stocks — really, they do — this ain’t one of ‘em.

While sports gambling also helps bring people into the casinos (hotel revenue), and those same people probably hit up the slots or take in a show, sports gambling itself brings in a tiny amount of revenue. Here’s a quick look at 2010 revenues across all of Nevada’s sports books, based on information from the American Gaming Association[2], vs. 2010 total revenues across the “big three” publicly traded gaming stocks, Wynn (NASDAQ:WYNN[3]), MGM Resorts International (NYSE:MGM[4]) and Las Vegas Sands (NYSE:LVS[5]):

Chart1a Sports Gambling: Just a Tiny Piece of the Pie

As the AGA points out, while $2.76 billion was wagered across Nevada’s sports books, 94% of that money was returned in the form of winnings.

Past that, also of note was an estimate by the National Gambling Impact Study Commission that $380 billion in illegal wagers are made every year. Put up against those revenues, that’s a stark comparison.

Chart2b Sports Gambling: Just a Tiny Piece of the Pie

If those estimated illegal wagers were on the books, even with 94% winnings returned, you’d be looking at $22.8 billion the coffers. No “right” or “wrong” on the gambling advocacy front, just a startling number to consider.

The short point: Casino stocks have plenty of potential and are worth looking into — just don’t get suckered into thinking a weekend of golf betting is going to push the needle too far.

Kyle Woodley[6] is the assistant editor of InvestorPlace.com[7]. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley[8].

Endnotes:
  1. record gambling on golf’s greatest event: http://www.bloomberg.com/news/2012-04-04/tiger-woods-s-win-fuels-record-setting-golf-wagering-at-masters.html
  2. American Gaming Association: http://www.americangaming.org/industry-resources/research/fact-sheets/sports-wagering
  3. WYNN: http://studio-5.financialcontent.com/investplace/quote?Symbol=WYNN
  4. MGM: http://studio-5.financialcontent.com/investplace/quote?Symbol=MGM
  5. LVS: http://studio-5.financialcontent.com/investplace/quote?Symbol=LVS
  6. Kyle Woodley: http://investorplace.com/author/kyle-woodley/
  7. InvestorPlace.com: http://investorplace.com/
  8. @KyleWoodley: https://twitter.com/#%21/kylewoodley

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