{"id":27747,"date":"2020-08-13T09:46:18","date_gmt":"2020-08-13T17:46:18","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=27747"},"modified":"2020-08-14T09:04:59","modified_gmt":"2020-08-14T17:04:59","slug":"the-big-enchilada","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/the-big-enchilada\/","title":{"rendered":"The big enchilada"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

“The Biggest Gaming Opportunity Since Riverboats in the Early ’90s.” That’s how JP Morgan<\/strong> gaming analyst Joseph Greff<\/strong>, a man not given to hype, characterized i-gaming and sports betting today. He described them as “as an emerging and exciting area of growth within US Gaming, with potential to drive significant multiple expansion and value creation for operations within our coverage universe.” How much value? Greff ascribes $17\/share of Caesars Entertainment<\/strong>‘s worth of sports betting and Internet wagering. It’s even better for Penn National Gaming<\/strong>: $18\/share. Sports betting “is highly competitive and should have a longer road to profitability, while iGaming is generally profitable for operators right now.” Furthermore, “near-term success drivers include brand recognition\/customer engagement, first mover advantages, willingness to spend on marketing\/customer acquisition, and media\/league partnerships.” Said Greff, “the potential growth of this industry should result in emerging companies seeking access to capital … and online\/digital companies entering the gaming industry.”<\/p>\n\n\n\n

Sports betting currently reaches 41% of Americans, being legal in 23 states and operational in 19 of those. In states where it is online, sports betting via the Internet is overwhelmingly dominant in market share. Greff projects $7.6 billion in sports-betting revenues by 2025 (it was $900 million last year, with four states accounting for almost all the action). “Our $7.6b forecast assumes 13 additional states legalize sports betting over the next several years, bringing the total to 35 (~70%+ of US adult population), though we note this is highly subjective.” Part of that assumption is dysfunctional California<\/strong>, so that’s a mighty big ‘if.’<\/p>\n\n\n\n\n\n\n\n

“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\u2019s not prudent to extrapolate trends in New Jersey<\/strong> (the most established\/mature OSB market) to the entire US,” due to the Garden State’s proximity to New York City<\/strong>, 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<\/strong>. “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<\/strong> and Rush Street Interactive<\/strong> … as well as OSB platforms such as DraftKings<\/strong> and Fanduel<\/strong> that have standalone apps.”<\/p>\n\n\n\n

Internet gambling is on pace to generate $1.4 billion this year (Sheldon Adelson<\/strong>, are you taking notes?) with Greff projecting $4.6 billion by 2025. “Michigan<\/strong> is a sizable market that should launch later in 2020 and be on investors\u2019 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<\/strong>, Illinois<\/strong>, Indiana<\/strong>, and Iowa<\/strong>.”<\/p>\n\n\n\n

Speaking of sports betting, William Hill<\/strong>\u2014already the decreed provider for Caesars\u2014is on its way to practically owning the Las Vegas Strip<\/strong>. Regulators in Nevada are considering applications that would put William Hill in charge of operations at The Cosmopolitan of Las Vegas<\/strong>, Venelazzo<\/strong>, Silverton<\/strong>, Palms Casino<\/strong> (someday …) and poor, unwanted Tropicana Las Vegas<\/strong>. Why does this not strike us as a good deal for the punters?<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

As long as we’re on the subject of Caesars, JP Morgan analyst Daniel Politzer<\/strong> 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<\/strong> and team”\u2014well that makes one of us\u2014”given their strong track record of exceeding integration targets for past acquisitions (Isle of Capri<\/strong>, Tropicana<\/strong>, MTR Gaming<\/strong>, 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.<\/p>\n","protected":false},"excerpt":{"rendered":"

“The Biggest Gaming Opportunity Since Riverboats in the Early ’90s.” That’s how JP Morgan gaming analyst Joseph Greff, a man not given to hype, characterized i-gaming and sports betting today. He described them as “as an emerging and exciting area … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[244,34,27,66,277,278,287,58,68,37,86,85,241,245,259,158,159,69,25,242,127,243,9,21,38,252],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/27747"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=27747"}],"version-history":[{"count":4,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/27747\/revisions"}],"predecessor-version":[{"id":27751,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/27747\/revisions\/27751"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=27747"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=27747"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=27747"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}