Back in mid-March, the U.S. Supreme Court handed down a critical decision for sports betting stocks. The justices — in a 6-3 outcome — declared the Professional and Amateur Sports Protection Act (PASPA) unconstitutional. In other words, sports betting will no longer be limited to just Nevada.
From a revenue standpoint, it’s not realistic to expect a huge surge. It will take time for various states to institute their own regulations and approaches. Although, when taking a long view of things, the Supreme Court decision should be a nice driver.
So what are some of the sports betting stocks to consider? Well, here’s a look at five:
Sports Betting Stocks: MGM Resorts International (MGM)
In a CNBC interview, Jim Murren, the CEO of MGM Resorts International (NYSE:MGM) noted that his company has spent considerable time and resources preparing for the legalized sports betting. This has included forming relationships with leagues as well as building technologies, such as the PlayMGM mobile app.
But MGM also has a geographic advantage, as it has various properties in states like Atlantic City and New Jersey. In fact, it looks like the company will expand on this footprint with acquisitions. Recently MGM shelled out $605 million for Empire City Casino, which is based in Yonkers, NY. Only 15 miles outside of Times Square, the venue has a raceway, electronic table games and live/simulcast horse racing.
But it is also important to keep in mind the MGM is fairly shareholder friendly. Over the years, the company has restructured its portfolio and established a REIT (Real Estate Investment Trust), called MGM Growth Properties LLC (NYSE:MGP). Since 2017, MGM has returned more than $1 billion to shareholders.
Sports Betting Stocks: Walt Disney Co (DIS)
OK, having Walt Disney Co (NYSE:DIS) on this list seems a bit odd. After all, isn’t this a family brand?
This is true. But the company also has a massive sports business, with its ESPN unit. Because of the trend towards cord cutting — led by streaming operators like Netflix, Inc. (NASDAQ:NFLX) — the segment has been under pressure.
Yet this is likely to change. The reason: With the rise in sports betting, there should be more interest in viewing sports. What’s more, ESPN will also likely provide more stats and other features to help bettors.
Keep in mind that over half of Disney’s operating income comes from media networks. So even a modest improvement could be a big deal.
In the meantime, there is another driver for Disney stock — that is, streaming. The company has already launched its ESPN service and there will be a general entertainment offering late next year.
Sports Betting Stocks: International Game Technology PLC (IGT)
International Game Technology PLC (NYSE:IGT) is the global leader in gaming technology products and services, such as lottery management, instant ticket printing, slot machines and yes, sports betting. While all these segments are highly profitable, the company’s top-line has been sluggish.
But legalized sports betting should help perk things up. IGT has decades of experience in the industry, primarily in Europe. The company provides systems like trading, risk management tools, point-of-sale displays and mobile apps. And of course, IGT has extensive relationships with U.S. casino operators.
The company also has an extensive IP (Intellectual Property) property portfolio. As of last year, there were roughly 5,000 patents or patent applications.
Sports Betting Stocks: Caesars Entertainment Corporation (CZR)
Caesars Entertainment Corporation (NASDAQ:CZR) has been mostly a bad bet for investors. During the past five years, the average compound annual return was a horrible -5%.
But legalized sports betting could be the right thing to get things into gear again. Actually, according to Jefferies David Katz, CZR is one of the best positioned to benefit. Note that the company has 15 casinos that could potentially benefit from legalized sports betting. The company has also been able to continue to invest in core technologies.
More importantly, it looks like CZR’s financials have stabilized, which has been facilitated by deep cost cutting, asset spinoffs and even a bankruptcy filing.
Sports Betting Stocks: Penn National Gaming, Inc (PENN)
Penn National Gaming, Inc (NASDAQ:PENN) is another casino stock that is likely to capitalize on the legalization of sports betting. The estimate is that as many as 17 casinos location will be able to generate business from this activity.
The $2.8 billion acquisition of Pinnacle will be a big help as well, which will add 12 new locations in North America. The deal is also expected to generate lucrative cost synergies, about $100 million.
It’s important to keep in mind that — over the past few years — PENN has been focused on driving up margins. And this has definitely helped bolster cash flows. During the latest quarter, adjusted EBITDA came to $242.6 million, above its own guidance of $233.6 million.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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