“We use lottery spend as a proxy given it is gaming product that is widely available/accepted across a majority of states, the demographics skew younger, and it provides insight into gambling proclivity by state,” Greff explains, adding that “it’s not prudent to extrapolate trends in New Jersey (the most established/mature OSB market) to the entire US,” due to the Garden State’s proximity to New York City, which may represent as much as 25% of New Jersey handle. Internet gambling, by contrast, is legal in only six states, if you count poker-only Nevada. “As the industry evolves, we expect 5-10 main competitors to emerge, with 3-4 likely capturing the majority of industry market share. Key competitors include traditional gaming companies such as MGM, CZR, and PENN, emerging firms such as Golden Nugget Online Gaming and Rush Street Interactive … as well as OSB platforms such as DraftKings and Fanduel that have standalone apps.”
Internet gambling is on pace to generate $1.4 billion this year (Sheldon Adelson, are you taking notes?) with Greff projecting $4.6 billion by 2025. “Michigan is a sizable market that should launch later in 2020 and be on investors’ radar. Of our projected $4.6b in 2025 revenues, we forecast $2.8b coming from states where iGaming is already legal ($1.3b in NJ, $800m in PA, $600m in MI), with $1.8b coming from states where we see a path to legalization, including Colorado, Illinois, Indiana, and Iowa.”
Speaking of sports betting, William Hill—already the decreed provider for Caesars—is on its way to practically owning the Las Vegas Strip. Regulators in Nevada are considering applications that would put William Hill in charge of operations at The Cosmopolitan of Las Vegas, Venelazzo, Silverton, Palms Casino (someday …) and poor, unwanted Tropicana Las Vegas. Why does this not strike us as a good deal for the punters?
As long as we’re on the subject of Caesars, JP Morgan analyst Daniel Politzer set a $50/share price target on CZR, long a low-priced stock. “We view CZR as a high-risk, high-reward stock (35% upside) for investors seeking exposure to (1) the recovery of the US regional gaming market … which has a permanently lower operating expense structure that should yield higher than historical margins … and (2) the attractive growth potential of the US sports betting/iGaming industry, a segment that likely will be broken out/separated from land-based casinos sooner rather than later.” Politzer added, “we have conviction in CEO Tom Reeg and team”—well that makes one of us—”given their strong track record of exceeding integration targets for past acquisitions (Isle of Capri, Tropicana, MTR Gaming, etc.). Lastly, our rating and projections also take into account reasonable and moderate expectations for what we see as a prolonged LV Strip recovery and near-term COVID-19 related risks to brick/mortar casinos.” Caesars derives 54% of its revenue from regional casinos, so that should at least provide a soft landing during the pandemic, regionals outperforming Sin City at present.
If the Palms is switching from its association with Stations sports books IMO that means it may be sold at some point.
Palms Sports book was always leased to Cantor Gaming (CG Technology). There is not change there other than William Hill has now purchased CG.This signals nothing.