Maryland keeps booming; Penn panned

Gaming’s recovery continues unabated in the Free State. Maryland gambling revenues for June were $161.5 million, a 13% gain on 2019. $64 million of that went to MGM National Harbor, up 12% and hoarding 39.5% market share. Maryland Live chugged along with $58.5 million, a 19% gain—and 36% market share—and Hollywood Perryville booked $8 million for a 21% leap. Vaulting 29%, Ocean Downs won $9 million, while Rocky Gap Casino was up 12.5% to $6. Did Gary Loveman build Horseshoe Baltimore on an Indian burial ground? Alone among Maryland casinos it was revenue-negative. It grossed $17 million for a 9% decline. West Virginia casinos finally caught up with the 2019 pace, being only 1% down from that halcyon year. Slot winnings were flat, tables down 6%. At Hollywood Charles Town Races, revenues actually outpaced 2019 by 5%, with a 6% slot gain overcoming an 1% dip at the tables.

It’s highly uncommon in our experience for a Wall Street analyst to put a “sell” rating on a stock but that’s just what Deutsche Bank‘s Carlo Santarelli did to Penn National Gaming yesterday. Penn has been the darling of The Street ever since it eviscerated the company during the Great Shutdown, which did wonders for its margins. The stock is trading at $72/share and Santarelli put a $31 price target on it. Why? Primarily because he believes Penn’s Internet gambling operations and Barstool Sports are “considerably overvalued” relative to its performance so far. (Shades of DraftKings.) He’s also skeptical of forecasts that call for year after year of revenue growth when he sees an upcoming contraction, especially compared to lean-and-mean 2021. Not even the additions of Hollywood Perryville and two slot parlors in Pennsylvania alleviate his gloom. Penn has tantalized Wall Street with preannouncements of $1.5 billion in 2Q21 revenue, a bit of bare ankle that may have been intended to distract from the issuance of $400 million in new debt.

Santarelli sees labor and marketing costs on the upswing, and increasingly aggressive marketing strategies, which could cut into both cash flow and profit margins. He still foresees an 11% gain in second-quarter revenue, led by Ohio, Louisiana, Indiana and Missouri, with Illinois, Pennsylvania and Massachusetts bringing up the rear. As for sports betting, “We continue to believe that as PENN expands into more states, investor expectations for market share, as measured by handle, will trend lower, as more data is assembled. As evidenced by the series of figures below, market shares in recently introduced states have drifted below 10%, while PA share has remained relatively stagnant, despite meaningful increases in promotional spending.” Indeed, sports betting/i-gaming is by far the smallest sector of revenue in the Penn portfolio. If the market corrects per Santarelli’s thinking this might be a very good time to cash out of Penn and pocket a dandy profit into the bargain.

While we’re on the subject of sports betting, FanDuel has claimed a coup by becoming the chosen provider for Mohegan Sun. It will supply sports betting, online gaming and DFS. A temporary sports book will be cobbled together while Mohegan Sun waits for regulatory approval and completion of a permanent book. Mohegan Sun projects that mobile sports betting and i-gaming will be available by fall. Said Mohegan Gaming & Entertainment CEO Ray Pineault,  “Our partnership is a priority for Mohegan Digital, as we look to grow and enhance our casino, sportsbook and online operations in Connecticut—and beyond.” “We have some incredible plans for the retail space at Mohegan Sun, with the potential to be the largest FanDuel sportsbook in the United States,” added FanDuel President Amy Howe. If Mohegan Sun is going with FanDuel, its only logical that Foxwoods Resort Casino succumbs to the embrace of DraftKings, especially since the latter is headquartered in Boston, just up the road.

Nevada is riding high on record gambling revenues … but that could be about to change. It’s one of the leading states for the Delta variant of Covid-19, as Silver State citizens continue to balk at getting vaccinated. We’ll fight off the temptation to say “Serves them right” and point out they could drag the Las Vegas economy down with them, especially if there is a second lockdown, God forbid. Nevada has one of the highest rate of Coronavirus cases in the U.S. (190 per capita) and hospitalizations are back up by a third. Las Vegas tourists are reported to be throwing caution to the winds and, having seen photos of the crowds, we can believe it. “If we know anything about Covid, we know that when people are gathering in close proximity to one another in large volumes, that is the recipe for Covid transmission to increase,” state biostatistician Kyra Morgan told The Associated Press. Nevada’s vaccination rate is a dismal 45%, although better than Utah‘s 39%.

“We are a state of skeptics when it comes to vaccines,” Morgan said. “We have a lot of anti-vaxxers, frankly, in the state of Nevada.” No shyte, Sherlock. Neither Gov. Steve Sisolak (D) nor Clark County seems to have the political spine to impose prophylactic measures, so look for the problem to increase. Those might not even be necessary if these stupid anti-vaxxers did the responsible thing and got their shots. As a Mississippi doctor lamented, “It is the unvaccinated people who are dying. The unvaccinated people who are going to the hospital. The unvaccinated people who are getting diagnosed, for the most part.” People are gambling with their lives or, as West Virginia Gov. Jim Justice (R, and a casino owner himself) says, they’ve entered “the death lottery.” Can’t put it better than that.